The Supreme Court questioned the Federal Board of Revenue’s (FBR) handling of the Super Tax case, with Justice Muhammad Ali Mazhar and observed that “the whole burden comes down to the ordinary man”.
A constitutional bench of five members, led by Justice Aminuddin Khan, entered petitions who challenged the introduction of the super tax of Pakistan Muslim League-Nawaz (PML-N) government in 2015 to raise funds for people displaced by Operation Zarb-E-AZB.
When he heard FBR adviser Asma Hamid’s arguments on Friday, the court increased the charge of the tax on ordinary citizens.
Hamid considered the bench that two sections of Islamabad High Court’s (IHC) decision opposite each other – one said no tax would be charged and the other allowed it.
Justice Hasan Azhar Rizvi noted that the super tax created losses of businesses and questioned policies affecting the elderly.
Read: No taxpayer challenged LHC who retained super tax, FBR SUPREME COURT tells
The bench also examined deductions from confidential funds. Justice Mazhar asked if the funds reached widows while justice Rizvi questioned whether companies could transfer amounts to other accounts if the widows were the net recipients.
To this, Hamid replied that she could guide the court on legal points, but had no knowledge of financial losses or benefits.
Justice Mazhar noticed that the procedure turned into an “I was attacked” questions and highlighted procedural complications.
At this, Hamid claimed that section 4C and 9 of the Income Tax Regulation, 2001, should be read together, with section 4C back a complete section.
Section 4C of the Regulation breaks down “income” as the sum of profits on debt, dividends, capital gains, mediation and commission, while taxable income as defined in section 9 refers to the “total income … of the person for the year reduced (but not below zero) with the total amount of deductions … for the year”.
FBR member Dr. Ishtiaq Opposition to add that the case at hand related to income, not individual taxpayers.
Justice Jamal Khan Mandokhail sought clarity on the basis of the petitions and questioned whether objections were formally raised or jumped on after a message of showing.
Hamid replied the affirmative to the latter, adding that she represented FBR in 20 other cases pending court.
The bench asked about the tax rate besides trying to understand why section 4C and 9 read together would not override the definition of income or exceptions from reimbursement.
Hamid maintained that amendments to the law under the 1979 regulation had already established the tax rate.
Super tax
The super tax is an additional tax on high -performance individuals, businesses and industries that are largely aimed at large companies. In the federal budget 2022-23, the government introduced up to 10% super tax on larger sectors, including cement, steel, sugar, oil and gas, fertilizers, banks and textiles, citing the need to raise extra revenue for financial stabilization.
Petitions that challenge the tax are filed before the supreme court of individuals and organizations. At the previous hearing, the bench was judged by FBR that no one had challenged Lahore High Court’s (LHC) judgment, maintaining the legality of the super tax imposed under section 4C of the income tax order, 2001, while reducing its rate from 10% to 4% for 16 sectors, including banking, and offering partial relief.
Earlier this year, the Apex Court asked whether the center could distribute super -tax revenue to provinces, noting that although the tax has been extended since 2016, no funds were used for the specified purpose.
Read more: Supreme Court CB questions the distribution of super -tax funds to provinces
During a recent hearing, the bench raised concerns about the effect of the super tax on ordinary citizens, Justice Mazhar observed that whether it was a cement bag or a liquid natural gas dispatch, “the whole burden comes down to the ordinary man”.
“The business will flourish if we make things easier for people,” he added.
“Don’t discourage taxpayers – when you do, people end up leaving the country,” Justice Mandokhail had warned in a similar way.
Hamid had then clarified that only 15 sectors of income that exceeded RS300 million were responsible for the super tax and that no company had required an inability to pay. The bench pressed FBR to explain why distinctions were created between the taxpayers, which emphasized that budgetary measures should not move the burden back to the public.
