SHC dismisses petitions against imposition of super tax

The Sindh High Court on Tuesday observed that a small number of taxpayers, mostly the salaried persons, are being burdened with additional amounts as taxes on income instead of making efforts for broadening the tax base and bringing the most affluent persons of the society into tax net.

Disposing of as many as 294 constitutional petitions and lawsuits filed by the private companies against the imposition of a super tax for the rehabilitation of temporarily displaced persons, a division bench, headed by Justice Aqeel Ahmed Abbasi, observed that the lack of an effective tax system might “exhaust the ability to pay of an existing taxpayer on the one hand” and would allow a huge segment of the economy to flourish disproportionately, without making any payment of taxes or to contribute their due share towards the growth of national economy.

The court observed that it is regrettable that the imposition of taxes in our country is considered merely as source to collect money, and not as a tool to regulate and make the national economy documented. The court observed that in such a manner the largest number of persons being benefitted from the national economy shall contribute by paying taxes in equal proportion to meet the expenditure of the government and for the development of the economic growth of the country on a regular basis.

It further said that countries having written a constitution must qualify the test of legislative competence and adherence to constitutional mandate on the one hand and must also meet the criteria of a well-established century’s old canons of taxation instead of using the imposition of taxes as a tool of extracting money from citizens just to meet government expenses as an ad-hoc measure for some specific purposes, as opposed to general purposes.

The court however dismissed the petitions and lawsuit against the imposition of the super tax, observing that the super tax imposed under Section 4B of the Income Tax Ordinance, 2001 through Finance Act 2015 along with 53 Money Bill possessed the characteristics of a tax, for being a compulsory exaction of money by public authority for the purposes of general revenue, whereas the amount to tax so charged goes to the federal consolidated fund has been rightly introduced under Article 73(2)(a) of the constitution.

It held that the super tax is an additional tax on income covered under Entry 47 of the IV Schedule to the constitution “taxes on income”, and does not amount to double taxation; therefore, it falls within the legislative competence of the national assembly to impose, abolish, remit, alter or regulate a tax, through the Finance Act along with the Money Bill under Article 73 (2)(a) of the constitution.

The high court held that the super tax was not violative of Article 25 of the constitution as it is neither discriminatory nor does it create any unreasonable classification amongst the same class of persons upon whom its charge has been created, while applying the common burden through a uniform rate of tax upon banking companies at four per cent of the income, and person other than banking company, having an income equal to or exceeding Rs500 million at three per cent of the income.

The petitioners’ counsel mainly argued that the impugned levy had been introduced for a specific purpose, that is rehabilitation of temporarily displaced persons, whereas, it is not meant for the purpose of general revenue and, therefore, is not a common burden; hence, it does not fall within the definition of a tax. They submitted that since the super tax does not qualify to be a tax, it could not have been introduced through the Finance Act under Article 173(2) of the constitution.

The federal government’s counsel submitted that the super tax is intra vires of the constitution and requested that all the petitions and the lawsuits filed to challenge the vires of Section 4B of the Income Tax Ordinance, 2001, be declared devoid of any merits, and the same may be dismissed accordingly.