Parliament’s sanctity must be upheld, policy matters are the government’s job – Supreme Court
Parliamentarians should be loyal to the country, not to parties – If a 10% tax is imposed, what will be the outcome?
Judges’ remarks during the hearing on the super tax case
Islamabad (Web News):
During the hearing of petitions filed against the decisions of the Lahore, Sindh, and Islamabad High Courts regarding the imposition of the super tax, the constitutional bench of the Supreme Court of Pakistan, headed by Justice Aminuddin Khan, observed that it should also be examined how many people will be affected and how many will benefit if a 10% tax is imposed, and what the outcome will be. He said that policy matters are the responsibility of the government.
Justice Jamal Khan Mandokhail remarked that all members should look at the national interest, not what their party says. “In Parliament, there is no party—that is what the Constitution states. Inside Parliament, there are parliamentary parties.” He further said it is argued that courts should stay away from political matters, but politics comes from the Constitution. “Lawyers repeatedly bring up credibility and end up talking politics. Parliament’s sanctity must be upheld. Whether Parliament’s decision is positive or negative for business, we respect it. The aim should be to maintain taxation without burdening the people, while also increasing revenue. The opposition always has to oppose. During COVID-19, medical equipment manufacturers earned excess profits. Government employees are told their salaries are being increased, but the same amount is cut back in taxes—given with one hand, taken back with the other. Litigants must sometimes bear losses for the greater national interest. A king can do anything, but the difference between monarchy and democracy is that in democracy, actions are taken according to law. In public interest, a business can be shut down or property can be taken into state custody, but this requires justification. Social and economic justice must be in accordance with the Constitution. The respondents want justice from the state and are saying: whatever you do, do it fairly.”
Justice Muhammad Ali Mazhar remarked: “If you ask any tax expert, or even me, I would say at least some tax should be imposed. In the end, it is the consumer who pays.”
Justice Syed Hasan Azhar Rizvi observed that members of Parliament should be loyal to the country, not to their parties. “They are elected by the people’s votes and should know what public issues are. Has any member of Parliament ever given proposals keeping in mind people’s problems? Why is there no debate in committees? Does debate even take place, or do bills just arrive and get passed?”
The five-member constitutional bench, headed by Justice Aminuddin Khan and comprising Justice Jamal Khan Mandokhail, Justice Muhammad Ali Mazhar, Justice Syed Hasan Azhar Rizvi, and Justice Shahid Bilal Hassan, heard 2,044 petitions on Thursday filed by the Federal Board of Revenue (FBR) challenging the high courts’ verdicts on the super tax. Former Attorney General Khalid Javed Khan, counsel for the respondents, presented arguments and will continue today (Friday).
Khalid Javed Khan argued that windfall profit means, for example, if someone buys a dollar and its value rises sharply, or if someone buys a $5 lottery ticket and wins Rs 20 million. He said the Sindh High Court had upheld 4-B, so it also upheld 4-C.
Justice Muhammad Ali Mazhar asked when the fiscal year 2022 would begin and whether counsel had a different view. Khalid Javed replied he would not comment on that point but said if 4-B was for a specific purpose, then it was not really a tax.
Justice Jamal Mandokhail asked Khalid Javed whether he supported 4-B. Khalid Javed replied that he would brief the court on that privately. He explained that under 4-B everyone was included, while 4-C applied only to specific sectors. For companies other than banks, the rate under 4-B was zero in 2022.
Khalid Javed argued that if a company in one of 15 specified sectors earns 90% of its revenue from that business, it would have to pay 10% super tax.
Justice Jamal Mandokhail asked whether tax experts were ever consulted before imposing taxes and what the procedure was for presenting bills in Parliament. Khalid Javed replied that policymaking and tax collection were two different things. Tax collectors are from the FBR who collect revenue, but policymaking is Parliament’s job. “If I were a policymaker, I would ask experts whether this benefits or harms the public.”
He added: “First I pay normal tax, then super tax is added, and from 2024, a surcharge tax is also imposed.” He noted that in 2021, due to COVID-19, airlines earned only 5% profit, but in 2022, when businesses reopened, their profits increased and super tax was imposed. He said there was no economic activity in 2021, people worked online, yet the IT sector was not taxed.
Justice Jamal Mandokhail remarked that medical equipment manufacturers profited during COVID-19.
Justice Syed Hasan Azhar Rizvi repeated that parliamentarians should know public issues and questioned whether any ever gave proposals accordingly. “Why do committees not debate? Does debate even take place, or do bills just arrive and get passed?”
Khalid Javed said he could not recall any instance where tax experts were consulted. He added that in the National Assembly, no tax expert was ever invited to discuss the pros and cons of a tax. The finance minister simply stated he supported super tax. “The kind of discussion that takes place in committees cannot take place in the National Assembly.”
Justice Rizvi said they had asked the FBR lawyers the same question, and they replied that experts from chambers of commerce were consulted. “If such meetings took place, submit records. If these proposals are in the nation’s best interest, they should be implemented.”
The Additional Attorney General explained that there are various committees, but “what comes out of those committees is not clear.”
Justice Muhammad Ali Mazhar said the principle is that before imposing a tax, experts’ opinions should be sought. “Ask any tax expert, or even me, I would say at least some tax should be imposed.”
Justice Aminuddin Khan remarked that it should also be clarified how many people will be affected and how many will benefit if a 10% tax is imposed, and what the final outcome will be.
Justice Muhammad Ali Mazhar said that in the end, it is the consumer who has to pay.
Khalid Javed Khan stated that whatever proposals come, they should be presented before Parliament.
Justice Muhammad Ali Mazhar said: “You should prepare your own dossier.”
Justice Syed Hasan Azhar Rizvi said: “Dossiers are usually torn up and thrown around.”
Justice Jamal Mandokhail remarked that the opposition always opposes. He further said that whether Parliament’s decision is positive or negative for business, we respect Parliament; the objective should be that taxation continues without burdening the public, and yet revenue also increases.
Justice Muhammad Ali Mazhar asked about the procedure under the Rules of Business.
Justice Jamal Mandokhail emphasized that all members should look at the national interest, not what their party says: “In Parliament, there is no party—that is what the Constitution says. Inside Parliament, there are parliamentary parties.”
Justice Syed Hasan Azhar Rizvi said that members should at least give suggestions, and added that parliamentarians should be loyal to the country, not just to their parties.
Khalid Javed Khan said this bench is listening to the lawyers with patience—something not seen in other benches.
He further argued that the same type of tax cannot be imposed twice: if 4-B is in place, then 4-C cannot be imposed. “You cannot give with one hand and take back with the other.”
Justice Jamal Mandokhail observed that government employees are given a salary increase but then taxed the same amount—“one hand gives and the other takes back.” He added that if 4-B is declared illegal, then banking companies will not pay any tax at all.
Khalid Javed Khan replied that 4-B was not imposed in 2023; its cut-off date should have been 2021. He argued that the Sindh High Court has ruled that rights accrued under 4-B cannot be taken back through 4-C.
Justice Jamal Mandokhail remarked that sometimes litigants must bear losses in the larger national interest.
Khalid Javed countered that these are not the rights of the state, but powers; rights belong to the citizens. “If Parliament says something is allowed until 2010 and later changes it back to 2008, then what credibility would Parliament have left? Parliament’s credibility should be higher than the executive’s.”
Justice Jamal Mandokhail said: “It has been said that courts should stay away from political matters. But where does politics come from? From the Constitution itself. The lawyer keeps invoking credibility and drifts into politics. Parliament’s sanctity must be upheld.”
Justice Aminuddin Khan remarked that policy matters are the job of the government.
Justice Jamal Mandokhail added: “A king can do anything, but the difference between monarchy and democracy is that in democracy, actions are according to law. In public interest, the state can shut down a business or take property into its custody—but there must be justification.”
Justice Muhammad Ali Mazhar said the FBR lawyers must explain the difference between 4-B and 4-C.
Justice Jamal Mandokhail emphasized that social and economic justice should be ensured under the Constitution: “The respondents want justice from the state and are saying, whatever you do, do it with fairness.”
Khalid Javed cited a judgment of Justice Muhammad Ali Mazhar, saying: “If tax has to be collected, it should be done in some lawful way.”
At this, Justice Jamal Mandokhail quipped: “Careful, or it might be caught at the boundary (like in cricket).” He continued: “It’s possible that tomorrow the government might demand retroactive tax under 4-B. We (the court) will not impose it, but those who imposed it should be responsible. Otherwise, it may backfire.”
Pointing towards the bench, Khalid Javed said: “If there are those who impose taxes, there are also those who protect us from them.”
Justice Jamal Mandokhail said that if there is ambiguity in the law, Parliament should amend the law to remove the ambiguity.
Khalid Javed added that the High Court has held that under 4-B, tax can be collected for 2023 but not for 2022.
Justice Jamal Mandokhail remarked: “Someone must have told them that you are making profits.”
The bench then adjourned further hearing of the case until today (Friday).