- Justice Mandokhail questions how super tax applies to already taxed income
- Petitioners argue Section 4C does not define levy as ‘additional tax’
- Bench warns provident fund deductions could hurt retirees, widows
- Govt defends levy as vital revenue measure, citing LHC earlier upheld legality with partial relief
ISLAMABAD: The Supreme Court on Wednesday raised fundamental questions about the legality of imposing a “super tax” on income that is already subject to taxation, as a five-member constitutional bench continued hearings on challenges to the levy first introduced by the Pakistan Muslim League–Nawaz (PML-N) government in 2015.
The bench, headed by Justice Aminuddin Khan, grilled petitioners’ counsel Dr Farogh Naseem over whether such a surcharge could be justified without amounting to double taxation. “How can a super tax be imposed on a system that is already subject to taxation?” asked Justice Jamal Khan Mandokhail, echoing a concern central to the petitions before the court.
Petitioners’ stance
Dr. Naseem argued that once income is assessed, additional taxation such as a surcharge may apply — but insisted that Section 4C of the Income Tax Ordinance, which introduced the super tax in 2022, did not clearly define it as an “additional” levy. He maintained that taxpayers had the option of paying either under Section 4 (general income tax) or Section 4C (super tax), adding: “It is a general principle that where two identical provisions exist, the taxpayer may choose the one more favourable.”
The judge, however, pressed further: “Where does this option come from?” Naseem likened it to criminal law, where courts apply the section with the lesser punishment when two provisions overlap. “Double taxation cannot be imposed,” he said, quipping in response to a query about his political background: “I did not draft Section 4C.”
Bench’s observations
The judges also examined deductions from provident funds, warning of the impact on ordinary citizens. Justice Hasan Azhar Rizvi cautioned that taxing Rs100 today could deprive retirees of Rs550 decades later. The bench further questioned how an “advance super tax” could be calculated when future profits were unknown.
The hearing was adjourned until Thursday, with Naseem set to continue his arguments. Justice Aminuddin Khan stressed the urgency of concluding the matter before October 7, when hearings on challenges to the 26th Constitutional Amendment are scheduled.
Background on super tax
The super tax, first introduced in 2015 and extended in successive budgets, is an additional levy targeting high-earning individuals, companies, and major industries. In the 2022–23 federal budget, the government imposed rates of up to 10% on sectors including cement, steel, sugar, oil and gas, fertiliser, banking, and textiles, citing the need for revenue to stabilise the economy.
Petitions against the levy have been filed by individuals and business groups, with the Federal Board of Revenue (FBR) defending Parliament’s authority to impose it. Earlier this year, the Lahore High Court upheld the legality of the tax under Section 4C, but reduced the rate from 10% to 4% for 16 sectors while providing partial relief to petitioners.
At previous hearings, the apex court has voiced concern that the levy burdens consumers. “Whether it is a cement bag or an LNG shipment, the entire burden comes down on the common man,” observed Justice Muhammad Ali Mazhar on September 25.
Broader constitutional questions
The bench has also weighed whether Parliament exceeded its powers by altering Section 14 of the Finance Act and by extending the super tax beyond its original scope. Counsel for FBR, Hafiz Ehsan Khokhar, argued that while purposes had shifted, the substance of the levy remained intact. He rejected claims of legislative overreach, citing precedents such as the Article 63-A case.
Judges have nonetheless pressed whether Parliament can pass a tax measure outside the annual budget cycle and flagged contradictions between the Islamabad High Court and Lahore High Court rulings.
In earlier sessions, Justice Rizvi questioned the government’s reliance on the “windfall profits” argument, asking whether routine price increases — such as petrol rising from Rs150 to Rs200 or sugar by Rs10 — could truly be considered extraordinary gains. Petitioners also criticised the inclusion of loss-making state enterprises such as PIA and Pakistan Steel Mills in the super tax list.
Since proceedings began on September 19, the court has repeatedly highlighted the need for more rigorous legislative debate on taxation. Justice Mandokhail remarked whether parliamentarians actually scrutinise the implications of tax laws before passing them, while counsel for taxpayers contended that FBR should confine itself to collection rather than policy design.
Next steps
With hearings set to resume Thursday, the bench is expected to hear further arguments from the petitioners before turning to the government’s detailed defence. The case has gained urgency not only due to its economic implications for major industries but also for its broader constitutional impact on taxation powers and the limits of legislative authority.
