Lawyers for companies wrap up arguments in super tax case hearing before FCC
ISLAMABAD:
Lawyers for exporters and tobacco companies argued Monday before the Federal Constitutional Court (FCC) that excessive taxation forces companies to move out of the country.”
A three-member FCC bench, headed by Chief Justice Amin-ud-Din Khan, resumed hearing the super tax case at its temporary premises – the Islamabad High Court (IHC).
During the hearing, counsel for various exporting companies, Rashid Anwar, concluded his arguments, while Ijaz Ahmed, representing tobacco companies, also concluded his submissions.
Lawyer Anwar told the court that the IHC had earlier ruled that tax could not be collected at less than 15 percent or more than 55 percent.
However, he claimed that taxes are currently levied at over 55 percent. He maintained that excessive taxation is forcing businessmen to move their businesses to low-tax jurisdictions such as Dubai, as the current tax rates do not leave much room for profit.
He said exporters currently pay up to 61 percent tax. Counsel for tobacco companies argued that out of a retail price of Rs 130 per pack of cigarettes, Rs 98 is collected as tax, while a pack sold at Rs 48 carries a tax burden of Rs 40.
Responding to these allegations, Federal Board of Revenue (FBR) counsel Asma Hamid said the figures presented by the petitioners did not tally with the official records. The petitioners also alleged that the government had selectively imposed super tax on certain sectors and exempted others.
Justice Amin-ud-Din Khan observed that it is within the discretion of the government to include or exclude any sector from taxation. The petitioners maintained that tax classification should be based on income rather than business sectors.
The court observed that if the taxation was imposed only on income, a sectoral classification would not be possible. The hearing was adjourned and will resume today.
The controversy surrounding Sections 4B and 4C of the Income Tax Ordinance, 2001 constitutes one of the most consequential tax and constitutional disputes in Pakistan’s recent history.
It involves revenue implications running into hundreds of billions of rupees and raises fundamental questions about the taxing power of Parliament, equality before the law and the scope of judicial review in tax matters.
Section 4B was introduced through the Finance Act, 2015, which imposed a “super tax” on high-income earners, particularly banks and other individuals earning income above Rs 500 million.
Hafiz Ahsaan Ahmad Khokhar, counsel for the Federal Board of Revenue (FBR), while giving background on the case, told The Express Pakinomist that the levy was originally justified as a temporary fiscal measure aimed at generating funds for the rehabilitation of temporarily displaced persons.
