Federal Constitutional Court upholds super tax, clears way for Rs310bln recovery

The Federal Constitutional Court has announced its verdict in the super tax case, restoring Section 4B of the Income Tax Ordinance and rejecting objections regarding the maintainability of the petitions.

Chief Justice of the Federal Constitutional Court, Justice Aminuddin Khan, read out the verdict in open court.

According to the ruling, Section 4B of the Income Tax Ordinance will remain in force retrospectively from 2015, and parliament has the constitutional authority to impose levies through legislation.

The decision is expected to enable the federal government to recover Rs310 billion in outstanding revenues.

The super tax was originally introduced in 2015 to support the rehabilitation of individuals affected by terrorism in Khyber Pakhtunkhwa.

At the time, an additional 5 per cent super tax was imposed on entities earning annual profits exceeding Rs300 million.

All high courts had previously upheld the imposition of the super tax. In 2022, the threshold was lowered to Rs150 million in annual profits, and the rate was increased to a maximum of 10 per cent.

Several business groups, banks and companies challenged the tax, arguing that its retrospective application amounted to double taxation.

The case has undergone extensive litigation.

Hearings began in the Supreme Court in 2019, continued under former Chief Justice Umar Ata Bandial, and were later transferred to the constitutional bench following the 26th Constitutional Amendment.

After the 27th Constitutional Amendment, the matter was referred to the Federal Constitutional Court.

In total, the case was heard 71 times across different judicial forums, including 17 hearings before the Federal Constitutional Court.