Justice Aminuddin Khan. PHOTO: ARCHIVE
ISLAMABAD:
The Federal Constitutional Court on Tuesday confirmed the validity of the supertax and ruled that Article 4B of the Income Tax Ordinance 2015 will remain in force.
FFC Chief Justice Aminuddin Khan read out the verdict and noted that the detailed judgment would be delivered later, dismissing objections that the case was not maintainable. The court also confirmed that parliament has the authority to collect taxes through legislation.
The FCC dismissed all petitions challenging the supertax. The court ruled that companies in the oil and gas sector should individually approach the relevant tax commissioner for any exemption.
The court rejected high court rulings that had declared the supertax discriminatory, affirming that the legislation is legally valid. The court clarified that Sections 4B and 4C, which govern the imposition of the super tax, are fully in accordance with the law.
It also specified that the tax will not apply to Mudarabah, mutual funds or unit trust funds.
The super tax was first introduced in 2015 in Khyber-Pakhtunkhwa to fund the rehabilitation of people affected by terrorism. At that time, an additional 5% super tax was levied on those making annual profits exceeding Rs 300 million. All the higher courts had confirmed its application.
In 2022, the supertax was applied to people earning more than Rs 150 million a year, with a maximum rate of 10 percent. Several businessmen, banks and companies challenged the tax before the higher courts, arguing against its retrospective application and the risk of double taxation.
The FCC has held 17 hearings on the matter. The case was first heard in the Supreme Court in 2019, during the tenure of former Chief Justice Umar Ata Bandial.
Following the 26th Constitutional Amendment, the case was transferred to a constitutional court, which continued to hear the proceedings. After the 27th Constitutional Amendment, the case was transferred to the Federal Constitutional Court.
Read: The court postpones the hearing on the supertax to January 12
Representatives who appeared included Hafiz Ihsan Khokhar of the Revenue Department, Dr Shah Nawaz of Karachi Commissionerate and Lahore Commissioner Asma Hamid.
Khokar told the media that the verdict will bring Rs 310 billion to the federal government. “The Federal Constitutional Court has recognized the authority of Parliament to legislate,” he said, adding that higher courts had previously exceeded their powers.
Khokhar also noted that the court confirmed that there had been no discriminatory treatment through the supertax.
super tax
The supertax is an additional levy on high-income individuals, businesses and industries, largely directed at large corporations. In the 2022-23 federal budget, the government imposed a super tax of up to 10% on major sectors including cement, steel, sugar, oil and gas, fertilizers, banks, textiles and others, citing the need to raise additional revenue for economic stabilization.
Read more: Clearly defined super tax amount, companies must pay: SC
Individuals and organizations filed petitions in the high court challenging the super tax introduced by the PML-N government in 2015 to raise funds for people displaced by Operation Zarb-e-Azb.
Early last year, the high court questioned whether the federal government could distribute super tax revenue to the provinces. Lawyers argued that the tax, introduced in 2016 to fund displaced people, has since been expanded but no funds have been used for its stated purpose.
