Supreme Court Questions Parliament’s Authority to Impose Super Tax

Justice Jamal Khan Mandokhail of the Supreme Court on Tuesday raised the question of whether the National Assembly could be granted specific constitutional authority to impose taxes that apply outside a financial year. The five-member constitutional bench, headed by Justice Aminuddin Khan, was hearing petitions filed by taxpayers challenging the validity of the amended Section 4C of the Income Tax Ordinance, 2001, for the tax year 2023. Senior counsel Hafiz Ehsaan Ahmad Khokhar, representing the Federal Board of Revenue, argued that the case did not involve the legislature’s competence. He maintained that under Article 77, parliament has exclusive authority to levy taxes, and the super tax introduced through the Finance Acts of 2015 and 2022 was a lawful exercise of fiscal power. Additional Attorney General Chaudhry Aamir Rehman told the court the federal government would file a written response in the coming days. Earlier, on April 4, 2024, the Islamabad High Court directed taxpayers to continue paying their liabilities under the amended Section 4C. The super tax, first introduced in 2015, applies to individuals, associations of persons, and companies earning more than Rs500 million, with banking companies taxed at 4% and other sectors at 3% to help fund the rehabilitation of displaced persons. Khokhar said Section 4B, which initially imposed the levy, had been upheld by all high courts, with challenges over double taxation, equality under Article 25, and legislative power decided in the federation’s favor. He contended that courts could only strike down laws that clearly violated fundamental rights, not reconstruct statutory schemes, warning that judicial overreach risked upsetting the balance of powers. On claims of double taxation, he argued that the contention was “wholly misconceived,” noting that the super tax is not a separate levy but part of income tax on high earners, comparable to a surcharge or advance tax. He stressed that Section 2(63) of the ordinance defines “tax” to include super tax, while Section 3 allows it to be charged for each tax year where expressly provided.