ISLAMABAD: A five-member Constitutional Bench of the Supreme Court, headed by Justice Aminuddin Khan, continued hearing a series of high-stakes petitions challenging the legality and implementation of the government’s controversial super tax on high-income companies.
The court proceedings included arguments from prominent legal figures, including former law minister Farogh Naseem, representing various corporate clients. The debate revolved around constitutional interpretations of tax laws, the structure of the 1979 Income Tax Ordinance, and the economic implications of the super tax on businesses.
CORE LEGAL DEBATE: RETROSPECTIVE VS. PROSPECTIVE TAXATION
Justice Muhammad Ali Mazhar questioned whether the amount of tax imposed should be based on assets or income from the previous fiscal year. Farogh Naseem clarified that under the income tax framework, taxation scales with income and that the 1979 Ordinance distinguishes between assessment tax (annual) and income tax, which can consider past performance.
“It is written in the ordinance that assessment will be done after one year,” Naseem argued, adding, “The mindset of the FBR is that income tax will be imposed based on income.”
Justice Mazhar responded by noting that clarity exists in the law regarding when assessment tax is to be levied, hinting at inconsistencies in the application of the super tax.
Counsel Naseem also spoke on the constitutional role of the judiciary, saying, “You, the esteemed judges, are the guardians of the Constitution,” while also noting, “Parliament is supreme, but the Supreme Court is an institution that provides justice.”
In response, Justice Jamal Khan Mandokhail weighed in on public reactions to court rulings: “The problem is that if we give a decision in someone’s favor, they are happy, and if we give a decision against them, they become unhappy.”
PRIVATE SECTOR PUSHBACK
Lawyers for corporate entities, including Aziz Nishtar (representing Pakistan Tobacco Company) and Ijaz Ahmed Zahid, also presented strong objections. Nishtar invoked Article 18, arguing the state had failed to ensure a conducive business environment, “The worst type of tax is currently in Pakistan,” he said.
He also highlighted that even businesses incurring losses were still subject to taxation. Nishtar urged the Federal Board of Revenue (FBR) to expand the tax net and lower rates, noting modern technologies like geo-tagging could help bring more informal businesses into the fold.
Justice Mazhar echoed this sentiment. Justice Aminuddin remarked that the super tax was introduced at a time when the government urgently needed revenue.
Ijaz Ahmed Zahid challenged the process by which the tax was enacted, saying that the Finance Bill was passed without fulfilling the requirements of Article 73 of the Constitution. He also argued that the government began implementing tax policies before the budget was formally presented on June 10.
Justice Mazhar questioned whether the dollar inflow had changed following the imposition of the super tax, and whether international energy price hikes were being fairly translated domestically.
The hearing was adjourned until tomorrow, with the bench expected to further examine whether the super tax adheres to constitutional norms and economic fairness.