Islamabad High Court deems super-tax on high-income businesses unconstitutional

The Islamabad High Court (IHC) has invalidated the imposition of a super-tax on high-income businesses, ruling it as unconstitutional. Justice Sardar Ejaz Ishaq Khan delivered the verdict on Thursday after a reserved decision. The court declared all notices of demand and recovery associated with the controversial tax null and void, providing relief to the affected businesses.

Furthermore, the court struck down Section 4C of the Income Tax Ordinance, effectively negating the legal basis for the super-tax. The petitioners, who challenged the validity of this tax, were represented by prominent legal counsel, including Salman Akram Raja and Adnan Haider Randhawa, among others. They argued that the imposition of such a tax was unjust and detrimental to the growth of high-income businesses.

The origin of this tax can be traced back to the budget speech of Finance Minister Ishaq Dar, wherein he announced the implementation of the super tax last month. Initially, the tax was proposed to be levied on individuals earning Rs500 million annually or more, but the conditions were later relaxed from the original proposal, which targeted those earning Rs300 million per annum.

It is worth noting that the Supreme Court had previously approved the imposition of the super-tax, setting it at 4 per cent for all industries in February. The government had initially imposed a 10 per cent rate for some industries and 4 per cent for others.

While the Lahore High Court also approved the tax, it added a caveat that the rules did not allow a tax rate higher than 4 per cent. However, the recent ruling by the Islamabad High Court has effectively struck down the super-tax altogether, providing significant relief to high-income businesses affected by the proposed tax.