he International Monetary Fund has urged the government of Pakistan to cover its revenue shortfall by ensuring full recovery of the Super Tax…

The Federal Constitutional Court on Tuesday rejected petitions challenging the Super Tax…

According to some estimates, Super Tax collections are expected to reach nearly Rs 380 billion by June 2026. Of this amount, approximately Rs 300 billion is expected to be recovered early.

The short order announced by the Federal Constitutional Court on January 27 may have provided temporary closure to a fiscal dispute. However, it has left serious constitutional questions unanswered. These omissions are not peripheral. They go to the root of parliament’s taxing competence and the court’s constitutional duty to test fiscal power against enforceable limits.

At least three fatal flaws emerge from the short order: the failure to engage with the constitutional architecture of income taxation under the Federal Legislative List contained in the constitution; the assumption that income can be re-labelled to justify multiple levies; and the complete silence on confiscatory taxation demonstrated on the record in T.Case 38/2025 [Writ Petition No. 81051/2023 transferred from Lahore High Court].

Most concerning of these is the short order’s failure to address a fact placed squarely on the record in above cited case: the effective tax burden exceeded 100 percent of declared taxable income. At that point, the levy clearly ceases to be taxation and becomes confiscation. This is not a marginal excess; it is a constitutional rupture. Courts have consistently recognised that taxation, which annihilates income, violates property rights, due process and freedom of enterprise.

From an investment perspective—domestic and foreign—the signal sent by the short order is unsettling. Investors do not only examine tax rates; they also assess:

whether the tax base is stable,

whether constitutional limits are respected, and

whether courts enforce predictable legal boundaries.

When income can be repeatedly targeted through shifting levies; when confiscatory outcomes are left unaddressed; and when binding constitutional warnings are ignored, the message to investors is clear: fiscal risk in Pakistan is institutional, not incidental.

This uncertainty carries a cost. It raises risk premiums, discourages long-term capital and undermines already fragile confidence.

The irony is hard to miss. The superior judiciary has itself warned that constitutional transgressions, particularly in fiscal matters, breed mistrust, waste public resources and ultimately undermine democracy and national cohesion. The Income Support Levy judgment by Supreme Court is a testament to that warning. The FCC’s short order appears to have departed from that discipline—disposing of a complex constitutional issue without confronting controlling principles or precedents.

The Income Support Levy imposed through Finance Act, 2013, was held unconstitutional as it was not a tax and could not be made part of a Money Bill. The same is true for Section 4B, which has been held intra vires though admittedly levied for the rehabilitation of internally displaced persons in 2019 as a one-time levy, but extended later till 2022. In Finance Act, 2022, a retrospective super tax imposed from tax year 2022 under Section 4C of the Income Tax Ordinance, 2001, replaced Section 4B. This time no specific purpose for levy of super tax on high income earners (sic) was declared.

Constitutional transgressions — particularly in fiscal matters — have consequences that extend beyond courtrooms, undermining democracy, economic stability and national cohesion.

Attempts to justify super tax by reference to corporate taxation powers blur the constitutional separation between subject and tax base. Corporations may be subjects of taxation, but the income they earn remains income—and income taxation is constitutionally confined. Allowing lateral movement across legislative entries to justify repeated taxation of the same income effectively nullifies constitutional limits. The short order’s silence on this point creates a precedent that can only deepen fiscal uncertainty.

Under the 1973 constitution, “taxes on income” are a defined and exhausted field. Once income is computed and taxed under the Income Tax Ordinance, 2001, the constitutional authority to tax that income stands consumed. Super tax, however, is imposed through a separate charging provision, after income tax has already been levied, on the same income base.

This distinction is not semantic. A levy that is not an additional rate within income tax, but a tax in addition to income tax, raises a direct constitutional question. The short order sidesteps this issue entirely, creating the impression that income can be re-labelled or re-engineered to justify multiple imposts. For investors—particularly foreign ones—this signals something far more troubling than high taxation: it signals that the tax base itself is unstable.

Super tax under Section 4C of the Income Tax Ordinance, 2001, suffers from a comparable defect. It is imposed in addition to income tax, on the same income base, through a separate charging mechanism. This raises a threshold constitutional question under the Federal Legislative List: whether parliament can tax the same income multiple times by altering form rather than substance.

The short order does not engage with this issue. It does not examine whether income taxation under the constitution is an exhausted field once exercised, nor whether a levy “in addition to income tax” is constitutionally distinct from an enhanced rate of income tax.

Established constitutional jurisprudence warns that strict adherence to constitutional text and procedure is what dissipates mistrust, avoids wastage of public resources and prevents institutional damage.

History is witness that constitutional transgressions—particularly in fiscal matters—have consequences that extend beyond courtrooms, undermining democracy, economic stability and national cohesion.

Measured against that benchmark, the short order falls short. By declining to engage with first-impression constitutional questions in a reasoned manner, it risks repeating the mistakes constitutional adjudication is meant to prevent.

The FCC’s short order may have secured short-term revenue gains for the Federal Board of Revenue and endorsement of the IMF, but it has done so by overlooking binding constitutional lessons from Pakistani jurisprudence.

The Income Support Levy Case should have served as a cautionary guide: constitutional shortcuts in taxation do not end well. Unless these weaknesses are addressed in a detailed judgment by the FCC—through principled constitutional reasoning—the cost will not be limited to one levy or one set of litigants. It will be paid in diminished investment confidence, legal uncertainty and erosion of trust in fiscal governance.

Dr Ikramul Haq, writer and advocate of Supreme Court, is an adjunct teacher at Lahore University of Management Sciences and, member of the Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics.