The Supreme Court on Monday heard petitions challenging the imposition of a super tax on provident funds, with a five-member constitutional bench led by Justice Aminuddin Khan questioning whether such a levy is justified when income tax itself is exempt.
During the hearing, Justice Muhammad Ali Mazhar cited Section 53 of the Income Tax Ordinance, which provides exemptions, and asked if a trust fund could be treated as private property.
Justice Hasan Azhar Rizvi warned that repeated super tax deductions could erode retirement benefits over time, observing that an initial levy could grow significantly and reduce employees’ expected payouts.
Justice Rizvi also questioned how an advance super tax could be calculated, a concern echoed by Justice Mazhar, who noted that advance payments would be difficult without final profit figures.
Additional Attorney General argued that the Second Schedule grants exemptions, including from super tax, but maintained that the government can impose extra levies if fiscal needs arise.
Counsel Asma Hamid countered that provident funds enjoy statutory relief and that a super tax contradicts legislative intent.
The bench noted that the responsibility for super tax payment is mentioned in the relevant schedule but questioned whether the government can impose a levy when income tax itself cannot be applied.
Read: SC questions super tax ‘burden on common man’
Later, Federal Board of Revenue (FBR) lawyer Hafiz Ehsan began brief submissions, saying he would assist the court on legal and constitutional points and adopt arguments already presented by Hamid.
Justice Muhammad Ali Mazhar urged counsel to complete arguments on key issues at the next hearing. Hafiz Ehsan requested only ten more minutes, but Justice Aminuddin Khan noted the session could not continue due to a judge’s other commitments, prompting the adjournment.
The hearing was adjourned until Tuesday.
The petitions challenge the legality of the super tax imposed on certain sectors, arguing that it exceeds the government’s constitutional authority.
Super Tax
The super tax is an additional levy on high-earning individuals, companies, and industries, largely aimed at big corporations. In the 2022–23 federal budget, the government imposed up to 10% super tax on major sectors, including cement, steel, sugar, oil and gas, fertiliser, banks, and textiles, citing the need to raise extra revenue for economic stabilisation.
Petitions challenging the levy have been filed before the top court by individuals and organisations. At the previous hearing, the bench was apprised by the FBR that no one had challenged the Lahore High Court’s (LHC) verdict, upholding the legality of the super tax imposed under Section 4C of the Income Tax Ordinance, 2001, while reducing its rate from 10% to 4% for 16 sectors, including banking, and offering partial relief to petitioners.
Earlier this year, the apex court questioned whether the Centre could distribute super tax revenue to provinces, noting that while the levy has been extended since 2016, no funds had been utilised for the stated purpose.
Read More: Supreme Court CB questions distribution of super tax funds to provinces
At a recent hearing, the bench raised concerns over the impact of the super tax on ordinary citizens, Justice Mazhar observing that whether it was a cement bag or a liquefied natural gas shipment, “the entire burden comes down on the common man”.
“Business will flourish, if we make things easier for people,” he added.
“Do not discourage taxpayers — when you do, people end up leaving the country,” Justice Mandokhail had cautioned, similarly.
Hamid had then clarified that only 15 sectors with incomes exceeding Rs300 million were liable for the super tax and that no company had claimed an inability to pay. The bench pressed the FBR to explain why distinctions among taxpayers were created, stressing that budget measures should not shift the burden back onto the public.