Islamabad – A hearing before the Federal Constitutional Court (FCC) has raised questions about the allocation of funds collected through a “super tax” levied between 2015 and 2020. While Rs144 billion was collected, only Rs37 billion was used for the rehabilitation of internally displaced persons, a disparity that prompted regret from Justice Syed Hassan Azhar Rizvi.
Funds and Their Distribution
The case, heard by a three-judge bench headed by Chief Justice Aminuddin Khan, concerns appeals against judgements from the Sindh, Lahore, and Islamabad High Courts regarding the legality of the super tax, introduced through Section 4B of the Income Tax Ordinance (ITO) in 2015. The Additional Attorney General (AAG), Chaudhry Aamir Rehman, stated that 50 percent of the collected funds were disbursed through the provinces, and characterized the overall collection as reflective of the government’s ambition.
The AAG further emphasized that tax collection is intended for social welfare programs, citing the Benazir Income Support Programme (BISP) which receives approximately Rs400 billion annually. However, opposing counsel argued that because the tax was specifically intended for rehabilitation, it falls under the legislative competence of the provinces, particularly after the abolition of the Concurrent Legislative List.
Legal Challenges and Arguments
The super tax was originally implemented via a Money Bill in 2015 to support the rebuilding of areas impacted by the Zarb-i-Azb operation against terrorism. Arguments centered on whether the tax should be considered a general tax or one specifically tied to social welfare. The AAG referenced the 1991 Sohail Jute Ltd case, arguing that the name of a levy does not determine its legal validity.
Senior counsel Makhdoom Ali Khan raised concerns about the authority of the Inland Revenue Commissioner to bring the case before the FCC, questioning why the Commissioner named the federal government and the Federal Board of Revenue (FBR) as respondents when neither had appealed the High Court judgements. He described the situation as “the tail wagging the dog.”
Advocate Hafiz Ehsaan Ahmad Khokhar, representing the FBR, asserted that taxation is a matter of legislative policy and that judicial restraint is necessary to uphold the rule of law and national fiscal sovereignty. He urged the court to uphold the validity of the tax and set aside the High Court judgements.
What Could Happen Next
The FCC could uphold the validity of the super tax, affirming the federal government’s authority in this area. Alternatively, the court could side with the opposing counsel, potentially requiring a re-evaluation of how funds collected through the super tax are allocated and managed. It is also possible the court could rule on the standing issue, dismissing the case without addressing the merits of the tax itself. A decision could prompt legislative changes regarding the allocation of funds raised through similar levies in the future.
Frequently Asked Questions
What was the purpose of the super tax?
The super tax was initially imposed in 2015 through a Money Bill with the stated purpose of rehabilitating areas affected by the Zarb-i-Azb operation against terrorism.
How much money was collected versus spent on rehabilitation?
Between 2015 and 2020, Rs144 billion was collected under the super tax, but only Rs37 billion was spent on the rehabilitation of internally displaced persons.
What was the main argument against the super tax?
The opposing side argued that the tax was imposed specifically for rehabilitation purposes, which now falls within the legislative competence of the provinces.
Given the complexities surrounding the allocation of funds intended for specific social programs, how can governments ensure greater transparency and accountability in the use of these resources?
Related reading