A judge of the Federal Constitutional Court expressed concern over the use of super tax funds, noting that while Rs. 144 billion was collected between 2015 and 2020, only Rs. 37 billion was spent on the rehabilitation of internally displaced persons, undermining the stated purpose of the levy.
Justice Syed Hassan Azhar Rizvi, a member of the three judge bench, observed that the disparity frustrated the objective of imposing the super tax under Section 4B of the Income Tax Ordinance.
The bench, headed by Aminuddin Khan, was hearing appeals against rulings of the Sindh, Lahore, and Islamabad high courts concerning the levy of super tax introduced through the Finance Act 2015.
Additional Attorney General Chaudhry Aamir Rehman told the court that 50 percent of the super tax proceeds were disbursed through provinces, adding that the scale of collection reflected the government’s broader fiscal ambitions.
He argued that tax collection was ultimately meant for social welfare and cited the Benazir Income Support Programme, under which the federal government spends around Rs. 400 billion annually on public welfare initiatives.
The super tax was imposed in 2015 as a one time measure to finance the rehabilitation of areas affected by the Zarb e Azb military operation. It applies to high income individuals, associations of persons, and companies earning over Rs. 500 million, with a rate of 4 percent on banking companies and 3 percent on other sectors.
During the hearing, the AAG referred to the 1991 Sohail Jute Mills case, arguing that the legality of a levy depends on its substance rather than its label. He said the Supreme Court had previously ruled that nomenclature alone could not determine the validity of a tax.
Opposing counsel contended that since the super tax was imposed for a specific rehabilitation purpose, it could not be treated as a general tax. Senior lawyer Makhdoom Ali Khan questioned the authority of the Inland Revenue Commissioner to file appeals before the court, arguing that neither the federal government nor the Federal Board of Revenue had challenged the high court judgements.
He said the situation amounted to “the tail wagging the dog,” questioning how the commissioner could name the federal government as a respondent when it was not itself an appellant.
Representing the FBR, Advocate Hafiz Ehsaan Ahmad Khokhar argued that taxation was a matter of legislative policy and lay beyond judicial discretion.
He urged the court to uphold the validity of the super tax, saying it was constitutionally sanctioned and consistent with principles of equality and international fiscal practice.
The court is expected to continue hearing arguments before reserving its judgement on the validity and application of the super tax.