Dr. Ikramul Haq
“All public power is a sacred trust, which is to be exercised fairly, justly, honestly and in accordance with law”— Workers’ Party Pakistan & Others v Federation of Pakistan & Others [PLD 2012 Supreme Court 681]
“He has, however, correctly contended that the levy of tax is the function of Parliament under Article 77 of the Constitution and the regulation and issuance of fiscal notifications is in the nature of subordinate legislation. He has further, again correctly, contended that such powers, if given to the Executive per se, would amount to a negation of the doctrine of parliamentary supremacy and the doctrine of separation of powers. Both these propositions are valid and make the distinction between executive and legislative power clear— Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (S.C Pak.)
“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 1993 SC 176) and All Pakistan Textile Mills Associations v. Province of Sindh (2004 YLR 192)”— Iqbal Zafar Jhagra v Federation of Pakistan [(2014) 108 TAX 1 (S.C. Pak)]
Legislative work requires research, debate, making informed decisions after taking proper input from stakeholders and experts. This has not been the case in Pakistan, as for decades we were under military rules. However, expectations of the people that after restoration of civilian rule (sic) in 2008, on exit of late General Pervez Musharraf, things would change for the better. On the contrary it has resulted in disappointment as on experiencing four consecutive elected (sic) governments, legislations remain dependent largely on Presidential Ordinances and statutory regulatory orders (SROs).
Like its predecessors, the incumbent government has been issuing Presidential Ordinances at a speed, unprecedented in Pakistan’s history—empirical data confirms that since 2003 by virtue of abusing Article 89 of the Constitution of Islamic Republic of Pakistan [“the Constitution”] the civilian governments have turned into “Ordinance” factories!
The federal and provincial tax codes of Pakistan contain numerous exemptions and concessions while many are added, modified or withdrawn through SROs issued by the Executive. These exemptions and concessions have not only eroded the tax base, but have also contributed towards widening the rich-poor divide. Total tax expenditure of Federal Board of Revenue (FBR) alone in fiscal year (FY) 2022-23 as per official report was Rs. 3.879 trillion that touched Rs. 4.5 trillion in FY 2023-24 and at the end of the current FY 2024-25 it would touch a mark of Rs. 5 trillion.
While trillions are being forgone annually as per FBR’s official tax expenditure reports, on May 2, 2025 the government resorted to a highly undesirable draconian legislation—Tax Law (Amendment) Ordinance, 2025 [“the Ordinance”]. It should have been placed before the National Assembly, meeting after three days on May 5, 2025 or in the Finance Bill 2025, expected to be presented along with Budget 2025 in the first week of 2025. Interestingly, the Parliament, both Senate and National Assembly have been kept in dark—even until writing of these lines [May 9, 2025 at 11:30 am], and was not laid before the National Assembly as required under Article 89(2)(a) of the Constitution.
In utter violation of Article 89, the Ordinance having devastating consequences for businesses and even individual taxpayers is not placed before the National Assembly fearing that it can elicit protest and resistance from the Opposition and public. One hopes that members of Parliament and tax bars would take strong exception to this undemocratic act of the government. A question must be asked at the floor of the house as to what was the real motive and urgency to promulgate this obnoxious Ordinance just before three days of regular session of the National Assembly—see its repercussions here.
In Pakistan, the elected governments, like the military dictators, have no hesitation in violating provisions of the land’s supreme law and judgments of the apex court. This time a terrible wrongdoing has been committed by a regime that keeps on reminding the nation that allegiance to the Constitution is the paramount duty of all the citizens!
In CIT v Eli Lily (Pvt) Ltd (2009) 100 Tax 81 (S.C. Pak), Justice Ch. Ijaz Ahmad in Para 3 of his separate note held as under:
“Taxing laws in particular must be framed in such a manner that people of Pakistan themselves voluntarily pay the taxes encouragingly and honestly. Such a motivation can only be infused among the people by eliminating the fear of being exploited by the machinery and income tax authorities. Such motivation will encourage our people to join the list of taxpaying nations consequently stabilizing the financial position of the state helping Nation get rid of IMF and World Bank. Fixing upper and lower tax limits for all occupants, industrialists and professionals other than salaried people will help inculcate a sense of responsibility and an encouragement among the people. Having achieved the maximum tax limit, the rigours of law should not touch the assessees. Once this legal technique is adopted, every person shall try his level best to reach the maximum level rather than avoiding paying the tax. This formula will also eradicate social evils of concealing, lying and erroneously submitting income tax returns resultantly providing a better and stronger social system….”
The principle of “no taxation without representation”, embodied in Article 77 read with Article 162 of the Constitution, has perpetually and flagrantly been violated in Pakistan—a lamentable act that remains unnoticed at all levels. The prime culprits are members of parliaments who have callously been delegating their legislative power of levying taxes to the federal government (through FBR). This is in utter violation of Constitution and Supreme Court’s decisions. Authority to issue SROs for levy of taxes or extending any kind of exemption or concession in respect of any tax is gross violation of Article 77 read with Article 162 of the Constitution, which says:
“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”.
Delegating power to an executive authority to frame laws or issue SROs is in utter violation of Article 162 as Parliament itself is not authorised to consider any Bill or amendment that imposes or varies a tax or duty, the whole or part of the net proceeds whereof is assigned to any province, unless the same before tabling by the Federal Government is first approved by the President.
Exercise of delegated powers by Federal Government (in reality by FBR) to vary a tax or duty through SROs is a complete breach of Article 162. It has never been challenged and even no suo moto action was ever taken by the Supreme Court prior to Constitution (Twenty-sixth Amendment) Act, 2024 [26th Amendment], which was passed in utter haste by the Parliament on October 21, 2024 receiving the President of Pakistan’s assent the same day.
The Supreme Court is supposed to interpret and enforce the Constitution, but is now itself captive in the hands of Constitutional Bench (sic)—the recent short order of which in the matter of military trial of civilians confirms intellectual bankruptcy in understanding and implementing the supreme law of the land.
Enforcement of Rule of Law determines the failure or success of democracy in any society. In the context of tax laws, it means that taxes are imposed through parliamentary process, rather than through Presidential Ordinances and administrative discretions (SROs). The language of Article 77 of Constitution is couched in negative starting with the word “no” meaning by that except Parliament, all other institutions/authorities are specifically excluded to levy “tax”.
Article 77 of the Constitution: “No tax shall be levied for the purposes of the Federation except by or under the authority of Act of Majlis-e-Shoora (Parliament)”. While hearing the case of levy of super tax under section 4B of the Income Tax Ordinance, 2001, for rehabilitation of internally displaced persons, the senior judge heading the Constitutional Bench (sic) tried to justify it saying the definition of “tax” in income tax law includes “fee”! The said definition refers to “appeal fee” and not the expression “fee” as used in Article 73(3)(a) in contradistinction to “tax” in Article 73(2)(a) of the Constitution.
Many law officers of Federal Government and FBR stalwarts, including retired Member Policy, Dr. Muhammad Iqbal et al, still insist that the words “by or under the authority of Act”, as used in Article 77 of the Constitution, authorise “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 of Pakistan 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 Apex Court confirmed the above submissions, against the views of law officers and Revenuecracy. Irritated by the Supreme Court’s judgement, the Revenuecracy, notorious for hoodwinking the Finance Ministers or else they could themselves become party to such unconstitutional measures, inserted amendments through Finance Act 2017 in Customs Act, 1969 [section 221A], Sales Tax Act, 1990 [section 74A], Income Tax Ordinance, 2001 [section 241] and Federal Excise Act, 2005 [section 43A], to nullify the judgement of Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (S.C Pak.).
The text of all the above-mentioned amendments was almost the same: “All notifications and orders issued and notified in exercise of the powers conferred upon the Federal Government, before the commencement of Finance Act, 2017, shall be deemed to have been validly issued and notified in exercise of those powers, notwithstanding anything contained in any judgment of the High Court or Supreme Court”. One wonders what kind of wizards of FBR, and Ministry of Law had approved/vetted the said amendments. It is also lamentable that office of Attorney General of Pakistan is still supporting such aberrations while defending writ petitions against section 99D of the Income Tax Ordinance, 2001.
The plain language of Article 77 of the Constitution, as construed by Supreme Court, could not have been bypassed through such amendments in subordinate laws. These, in fact, amount to contempt of court. The then Law Minister and Attorney General of Pakistan, both seasoned lawyers, failed to advise the then Finance Minister to withdraw them as the only remedy was a constitutional amendment and not mere insertion of so-called validation clauses (sic) in subordinate laws. Now, even the young Attorney General has also failed to do so.
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 still imposing new taxes and/or varying tax rates through SROs violating not only Article 77, but also openly defying Article 189 of the Constitution.
It was once again blatantly done through Finance Act 2023 giving powers under section 99D of the Income Tax Ordinance, 2001 to the Federal Government to levy additional income tax on “windfall income profits and gains”.
The Federal Government is barred by the Constitution to table a 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 violations 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.
Many experts (self-assumed) are unfortunately reading Supreme Court’s judgement in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (S.C Pak.) by ignoring its true context. They are just emphasizing and highlighting one point that the Prime Minister cannot take decisions on his own, without the consent of Cabinet. This is obvious as elaborated by the Apex Court in Para 96 of its judgement. However, the real issue decided by the Supreme Court is that right of taxation cannot be delegated to Executive [Para 67] even by the Parliament.
All the so-called elected civilian governments (sic) since 2008 have been frequently violating the command of the Constitution and judgements of the Supreme Court binding under Article 189 of the Constitution by:
- making Article 89 as substitute of normal procedure laid down through proper Bills after consultative process and taking input from the experts;
- including in Money Bills subjects/items that could not be part of Article 73;
- not presenting Money Bills enforced through Ordinances before the National Assembly as required under Article 89(2)(a)(i) despite holding many sessions after their promulgation;
- promulgating many Ordinances just 24 to 48 hours before or after the sessions of National Assembly and or Senate;
- keeping Presidential Ordinances covered under Article 73(2) pending (even not presented in the National Assembly and Senate for recommendations) and then including the same in the annual Finance Bill to get them passed as Finance Acts;
- usurping the legislative power of Parliament through Ordinances even when no exigency exists and both Senate and National Assembly are in existence holding regular sessions. Even joint sittings for emergent situations can be summoned as per procedure laid down in Article 72 of the Constitution;
- not submitting the Ordinances before the National Assembly or in Senate, or both, as the case may be, in terms of Article 89 of the Constitution;
- seeking extension of 120 days without placing Ordinances [Money Bills] before the National Assembly and in other cases in either of the Houses without offering for debate within 120 days, though Article 89(3) clearly says that these shall be deemed to have been laid according to the principle of Money Bill in National Assembly and in other case in either of the houses where they are first laid; and
- levying taxes or extending exemptions, concessions and waivers through SROs
Article 77 read with Article 162 of the Constitution debars the Federal Government to table any Bill in the National Assembly to grant exemptions without the prior approval of the President. However, unfortunately, this power has been delegated unconstitutionally to Executive by the Parliament.
The legislators’ main job is to pass laws to protect public rights, ensure welfare for all, especially the less-privileged and provide effective justice system safeguarding that rule of law and transparency are key to counter private interests over public interests. On the contrary, since 2008, all successive civilian governments have been compromising the supreme law of the land and have failed to establish an independent/autonomous anti-crime authority, as National Crime Agency of United Kingdom.
Enforcement of Rule of Law determines the failure or success of any society. In the context of tax laws, it means that taxes are imposed through democratic means and parliamentary process, rather than by Ordinances by President or by Executive through SROs. Money Bill should not be polluted by inclusion of items not forming its part as explained aptly by illustrious jurist of our time, Justice Mansoor Ali Shah in 2011 PTD 2643: “Integrity of a money bill must be jealously guarded and matters falling outside the purview of Articles 73(2)(a) to (g) of the Constitution should not be permitted to stealthily crawl into a money bill (at times due to political sophistry of the Government in power) and adulterate its sanctity”.
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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.