Dr. Ikramul Haq & Abdul Rauf Shakoori
“It will not be out of context at this stage to observe that our country has a Federal System of Government, which is based on trichotomy of power, each organ of the State is required to function/operate within the bounds specified in the Constitution”—Syed Masroor Ahsan and others v Ardeshir Cowasjee and others PLD 1998 SC 823
Pakistan is a unique country where the executive authority can conveniently undo tax laws passed by parliament through executive orders (SROs); this is utter violation of Articles 77 & 162 of the Constitution. Article 162 debars the Federal Government to table Money Bill without the prior approval of the President, but interestingly, essential legislative powers have been delegated unconstitutionally to the EEC first through the Finance (Amendment) Ordinance, 2015 and then by passing the Finance Act, 2015, in blatant disregard of Article 77 of the Constitution— Excessive Taxation, The News, February 2, 2016
The principle of “no taxation without representation”, embodied in Article 77 read with Article 162 of the Constitution of Islamic Republic of Pakistan [“the Constitution], has perpetually and flagrantly been violated by our elected legislators (sic). Executive could not be given power to levy tax, which includes exemption from tax or varying of tax rates. The delegation of essential legislative power of taxation to the federal government or Federal Board of Revenue (FBR) is in patent disregard of Article 77 read with Article 162 of the Constitution.
Article 77 of the Constitution categorically says that no tax shall be levied for the purposes of the Federation except by or under the authority of the Act of Parliament. The Supreme Court of Pakistan in its landmark judgement in Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others (2013) 108 TAX 1 (S.C.Pak.) expalined it as under:
“It is well settled proposition that levy of tax for the purpose of Federation is not permissible except by or under the authority of Act of Majlis-e-Shoora (Parliament). Reference in this behalf may be made to the case of Cyanamid Pakistan Ltd. V. Collector of Customs (PLD 2005 SC 495), wherein it has also been held that such legislative powers cannot be delegated to the Executive Authorities. Also see Government of Pakistan v. Muhammad Ashraf (PLD 1993SC 176) and All Pakistan Textile Mills Associations v. Province of Sindh (2004 YLR 192)” [Page 18, Para 20]
Levy of taxation through an SRO is a naked and blatant violation of Article 77 of the Constitution. Some stalwarts of FBR, even many law officers of Federal Government, have been insisting, still do so, that words “by or under the authority of Act”, as used in Article 77 of the Constitution, authorize “taxation by delegation” through SROs. However, before the Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (S.C Pak.), Additional Attorney General submitted:
“ [the] levy and exemption of tax is the function of Parliament under Article 77 of the Constitution and…… power of exemption if given to the executive per se, would amount to the negation of the doctrine of parliamentary supremacy and the doctrine of separation of powers”.
The above submissions of Additional Attorney general, endorsed by the Supreme Court, are binding on all courts. It amply disapproves the view of FBR and law officers that power of taxation can be delegated to Executive as Article 77 uses the words “under the authority”, a malpractice, in fact blatant violation of the Constitution, continuing even till today.
It is shocking that after the binding judgements of Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (S.C Pak.) and Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others [(2013) 108 TAX 1 (S.C. Pak)], FBR is imposing new taxes and/or varying tax rates through SROs violating not only Article 77, but also openly defying Article 189 of the Constitution.
The delegation of power to an executive authority to impose tax under an SRO is in utter violation of Article 162 of the Constitution. It was blatantly done through Finance Act 2023 giving powers under section 99D of the Income Tax Ordinance, 2001 to the Federal Government to levy tax on “windfall income profits and gains”. The Federal Government is barred by the Constitution to table Money Bill that imposes any tax or varies a tax or duty, the whole or part of the net proceeds whereof is assigned to any province, unless the same is first approved by the President. The post facto saving of such a lapse by virtue of Article 75(4) cannot be used as a tool for blatant and perpetual violation under Article 162 of the Constitution. The supreme law of the land must be read as a whole and all its provisions should be harmonized, respected and implemented.
The principle of “no taxation without representation”, embodied in Article 77 read with Article 162 of the Constitution, is perpetually and flagrantly violated—a lamentable act that remains unnoticed at all levels. The prime culprits are members of parliaments, who have been delegating their legislative powers of levying taxes to the federal government (through FBR) though required to act within the four corners of the Constitution. Authority given to the Federal Government or any executive authority for levying tax or changing tax rates or definition of “agricultural income” or extending any kind of exemption or concession in respect of any tax is gross violation of Article 162 of the Constitution, which reads:
“162. Prior sanction of President required to Bills affecting taxation in which Provinces are interested: – No Bill or amendment which imposes or varies a tax or duty the whole or part of the net proceeds whereof is assigned to any Province, or which varies the meaning of the expression “agricultural income” as defined for the purposes of the enactments relating to income-tax, or which affects the principles on which under any of the foregoing provisions of this Chapter, moneys are or may be distributable to Provinces, shall be introduced or moved in the National Assembly except with the previous sanction of the President.”
The power to levy windfall tax under section 99D of the Income Tax Ordinance, 2001 through delegated authority to the federal government by the National Assembly is a blatant violation of supreme law of the land. How can Parliament delegate a power to the Federal Government when it cannot even table any Money Bill without the prior sanction of the President? How can the Federal Government take benefit of its own wrong doing?
Exercise of delegated powers by the Federal Government or FBR to vary a tax or duty through SRO, is a blatant violation of Article 162 of the Constitution. Unfortunately, it has never been challenged at the time of tabling the annual finance bills. Even the standing committees on finance and taxation of the National Assembly and Senate that consider these Finance Bills have never pointed out this glaring violation of the Constitution—this confirms our intellectual bankruptcy in understanding and implementing the supreme law of the land.
Enforcement of Rule of Law determines the failure or success of a society. In the context of tax laws, it means that taxes are imposed through parliamentary process, rather than through administrative discretions (SROs). Article 77 of Constitution says that no tax shall be levied for the purposes of the Federation except by or under the authority of the Act of Parliament. Thus, the delegation of legislative power to the executive to vary a tax or duty renders the entire tax system unconstitutional. The so-called wizards sitting in FBR have been playing havoc with tax laws by issuing infamous SROs—granting exemptions or modifying the taxes imposed by the parliament or even levying taxes under the garb of rule-making powers.
Tax laws should be framed and enacted through a constitutional process and their proper enforcement is to be ensured by tax administration. All segments of the society should adhere to the rule that nobody is above law. In Pakistan, tax laws are meant only to fleece the poor for the luxuries of the rich. The privileged classes pay no taxes on their collossal incomes and wealth, but the poor are subjected to all kinds of oppressive taxes. Adding insult to injury, they get nothing in return—even deprived of protection to their lives and property, what to speak of basic facilities of health, education, transport and housing.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing.
He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Adbul Rauf Shakoori
The recent publication, coauthored by these writes is
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46