Staff Reporter
ISLAMABAD The Supreme Court of Pakistan dove into a thorny constitutional debate on Tuesday, probing whether the National Assembly can pass tax laws that extend beyond the financial year’s boundaries.
The question, posed by Justice Jamal Khan Mandokhail, emerged during a hearing before a five-judge constitutional bench led by Justice Aminuddin Khan, which is examining challenges to amendments in Section 4C of the Income Tax Ordinance of 2001, governing the super tax for the 2023 tax year.
The super tax, launched by the Pakistan Muslim League-Nawaz government in 2015, targets individuals, partnerships and companies earning over Rs500 million annually, levying 4 percent on banking income and 3 percent on other sectors. The revenue, legislators said, would fund the resettlement of people displaced by conflict in Pakistan’s northwest.
Taxpayers challenging the law argue it unfairly heaps additional burdens atop existing income taxes and disrupts fiscal norms. The issue has seen prior judicial scrutiny. On April 4, 2024, an Islamabad High Court bench, led by then-Chief Justice Aamer Farooq and Justice Tariq Mehmood Jahangiri, ordered a petitioner in related appeals to continue paying taxes under the amended Section 4C, as revised by the Finance Act of 2023.
Hafiz Ehsaan Ahmad Khokhar, senior counsel for the Federal Board of Revenue, countered that the case does not question the National Assembly’s legislative authority. “The present case did not involve any question of the National Assembly’s legislative competence,” he told the court. Khokhar robustly defended the constitutionality of Sections 4B and 4C, citing Article 77, which grants parliament exclusive tax-levying powers.
The super tax, enacted via Finance Acts in 2015 and 2022, represents a valid exercise of that authority, he said. Section 4B, the original super tax framework for high earners, has been upheld by every high court, he noted, dismissing concerns over double taxation, violations of Article 25’s equality clause and legislative overreach.
On Section 4C, introduced in 2022 with progressive brackets and sector-specific rates, Khokhar criticized high court rulings that altered the law’s structure as judicial overreach. “The high courts erred by reconstructing the statutory scheme. This amounted to judicial legislation,” he argued. Under Article 199, courts can strike down laws only for clear violations of fundamental rights, not retool tax policy, he added, warning that such rulings disrupt the balance between legislature and judiciary.
Khokhar rejected double-taxation claims as “wholly misconceived,” pointing to Article 77 and Entry 47 of the federal legislative list, which empower parliament to tax all non-agricultural income. Section 2(63) of the ordinance classifies super tax as part of “tax,” while Section 3 ties income tax to annual charges as specified. The super tax, he clarified, is not a distinct levy but an additional income tax component for high earners, comparable to a surcharge or advance payment.
Additional Attorney General Chaudhry Aamir Rehman told the court the government would submit a written response within days. The case highlights tensions between Pakistan’s revenue needs and judicial oversight, with implications for federal finances amid ongoing economic strains from inflation, debt and past floods. The bench set no timeline for a ruling, leaving businesses and policymakers awaiting clarity on the limits of parliament’s taxing powers.
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