On Monday, the Supreme Court heard the cases against the super tax on provident funds. The court questioned whether imposing a super tax on provident funds is lawful, since the provident funds are exempt from income tax.
A five-judge constitutional bench, headed by Justice Aminuddin Khan, examined if provident funds, which are safeguarded by the Income Tax Ordinance, could be taxed. Justice Muhammad Ali Mazhar mentioned Section 53 of the ordinance and inquired if a trust fund could be equated with private property.
Justice Hasan Azhar Rizvi cautioned that subjecting repeated super tax deductions may decrease workers’ retirement income. He clarified that when the tax is added over time, it may produce lower payments for workers. Both Mazhar and Rizvi also expressed concerns regarding the challenge of determining an advance super tax without knowing the end profit amounts.
The Additional Attorney General contended that although some of the exemptions in the Second Schedule apply to super tax, the government is given authority to levy additional taxes if the finances of the government so demand. Lawyer Asma Hamid, however, contended that levying tax on provident funds is against the intent of the legislation, which gives statutory relief to workers.
The bench inquired whether the state has the constitutional right to levy a super tax on provident funds if income tax does not exist. Federal Board of Revenue advocate Hafiz Ehsan then started making his points, approaching on constitutional grounds and quoting previous arguments.
The hearing will resume next Tuesday, because Justice Aminuddin Khan pointed out that the bench could not proceed due to time limitations.
The petitions argue that the super tax, first introduced in the 2022–23 budget, exceeds the government’s constitutional power. This tax, which can be up to 10% on major industries, was later reduced to 4% for 16 sectors, including banking, by the Lahore High Court.
