In a landmark decision, Pakistan’s Federal Constitutional Court has delivered a decisive super tax ruling, confirming that parliament holds exclusive authority to impose and legislate taxes. The verdict brings an end to years of legal uncertainty surrounding the controversial levy and is expected to provide significant financial relief to the federal government.
A three-member bench of the Federal Constitutional Court, headed by Chief Justice Aminuddin Khan, heard the long-running case and restored Section 4 B of the Income Tax Ordinance with effect from 2015. The court rejected objections regarding the maintainability of petitions and ruled that the legislature acted fully within its constitutional mandate.
According to the judgment, parliament is empowered to introduce taxation measures through legislation, and previous findings by high courts declaring the super tax discriminatory were incorrect. The court stated clearly that Sections 4 B and 4 C of the ordinance are lawful and constitutionally valid, reinforcing the strength of the super tax ruling.
However, the court clarified that the super tax will not apply to modarabas, mutual funds, and benevolent funds. It also allowed room for flexibility by stating that oil and gas companies may seek individual relief by approaching the relevant tax commissioner.
Speaking after the verdict, Revenue Division lawyer Hafiz Ehsan Khokhar said the decision would have a strong fiscal impact. He confirmed that the federal government is expected to recover approximately RRs. 310billion following the ruling. He added that the court acknowledged parliament’s legislative authority and noted that high courts had exceeded their jurisdiction in earlier judgments.
The super tax was first introduced in 2015 to fund the rehabilitation of people affected by terrorism in Khyber Pakhtunkhwa. Initially, a 5 per cent tax was imposed on companies earning profits above Rs300 million. In 2022, the tax scope was expanded to include profits above Rs150 million, with rates raised to as high as 10 per cent.
This expansion triggered legal challenges from businesses, banks, and corporations, citing retrospective taxation and double taxation concerns. The case went through multiple legal forums and involved 17 hearings before finally being settled under the super tax ruling delivered by the Federal Constitutional Court.
