There has been a lot of discussion amongst constitutional lawyers regarding the legality of tax amnesty schemes. For the first time in the history of Lahore High Court, a point of law has been settled in a case by the honourable justice Shahid Karim that tax amnesty schemes brought by the federal government after seeking approval from the parliament are lawful and tenable. A petition was filed challenging the vires of income tax amendment act 2016, through which an attempt was made by the federal government to bring traders under the tax net and those business class people who had not paid a single penny in tax for the past ten years. Through the income tax amendment act 2016, such traders were given the incentive to obtain NTN number, and if they had not paid taxes for the past ten years, then they were supposed to pay a fraction of tax in accordance with the rates prescribed in the schedule of income tax amendment act 2016. The whole income tax amendment act 2016(from now on referred as Tax Amnesty scheme) was challenged before the Honourable Lahore High Court. Appearing as a counsel, it was argued by me that tax amnesty schemes should be declared illegal and ultra vires the Constitution as people who did not pay a single penny in tax should be declared as tax evaders rather being given protection under the income tax amendment act 2016.Secondly, it was contended before the court that such people should be criminally prosecuted under the relevant sections of income tax ordinance 2001.It was further contended that if the tax amnesty schemes can be accorded to traders, then such privilege should also be given to the professionals like lawyers, doctors and bankers. The honourable justice Shahid Karim issued notices to the Attorney General of Pakistan on the first date of hearing to assist the court on the point of law that how tax amnesty schemes can be justified. The federal board of revenue also contested the case. After hearing the arguments, the honourable justice gave a landmark judgement that tax amnesty schemes are neither discriminatory nor a privilege being accorded to a particular class. The honourable judge rather declared tax amnesty schemes as an affirmative action of the federal government to bring those people within the tax net who were previously not paying taxes. The Justice Karim further elaborated the point that it was not within the ambit of the constitutional court to decide that whether the tax amnesty scheme was effective or not as it pertains to a policy issue which solely is the domain of the government, not the court. The honourable judge also declared that according tax amnesty schemes to a particular class is not a discriminatory measure. It further elaborated the fact that awarding tax amnesty schemes to a specific class in a country is a reasonable classification and fulfils the legal jurisprudential principles of ‘intelligible differentia’. The judgement has been recently reported in a law journal as 2018 PTD (Pakistan tax Digest)February edition at page 336 in a case titled as Sheraz Zaka vs Federation of Pakistan etc. Later on, after the Lahore High court’s judgement vis-à-vis tax amnesty scheme, the honourable Supreme Court of Pakistan in its landmark judgement Muhammad Hanif Abbasi vs Imran Khan Niazi, reported as PLD 2018 SC 189, has comprehensively discussed tax amnesty scheme as follows: ‘It is an incentive given by the government or tax authorities to people having undisclosed income or wealth to declare such income and assets by paying tax thereupon in exchange for immunity against penalty or prosecution for the previous non-disclosure. In other words, undisclosed income or assets are thereby whitened and legitimised. Such a scheme extends a promise or undertaking on behalf of the State to existing or potential taxpayers that the source of their undeclared income or assets would neither be probed nor be subjected to action if any person avails such scheme.’ The honourable supreme court further held that as per clause of the Amnesty Scheme where a declaration in respect of undisclosed income has been properly made, and the tax due on such income has been fully paid, such declaration should be accepted by the Deputy Commissioner of Income Tax concerned without any further proceedings, and the declarant shall be informed accordingly. It has been further clarified by the Supreme Court in the same reported judgement that to subsequently impute dishonesty and to prosecute and punish a person for availing an amnesty scheme would violate the solemn assurance of immunity given by the law and the ‘forgiveness’ that is thereby entailed. Hence, what cannot be done directly cannot also be done indirectly or collaterally. The state’s power to tax its people is derived from its capacity to generate revenue and invest in long-term purposive activities to create an asset base for sustained economic development In the past, the tax amnesty schemes have been severely criticised by the legal and economic experts as the traders being awarded the tax amnesty scheme were also given exemption from filing the wealth statement as well as granted exemptions from the scrutiny of an audit. After the judgements delivered by the superior courts, the federal government would be at liberty to award tax amnesty schemes from time to time to bring any particular class in a tax net. Regardless of the fact, the tax amnesty scheme succeeds or not, this measure of the federal government to award tax amnesty schemes would always be considered as affirmative action in the light of honourable Lahore High Court’s judgement as well as Supreme Court’s verdict. Last but not least, summing up the whole discussion, the jurisprudence developed till now has clarified that in economic matters, a broad and expansive leeway has always been granted to government and courts have always shown restraint in the analysis of such matters in their power of judicial review. The superior courts have adopted this approach consistently in interpreting the fiscal statutes since the landmark judgement it gave, reported as PLD 1997 SC at page 582, Ellahi Cotton Mills versus Federation of Pakistan etc. Nevertheless, on the critical side, amnesty schemes not only discourage documented taxpayers by legalising illegal assets at lower rates of taxes, but they also undermine the state’s capacity to tax in the future. The state’s power to tax its people is derived from its capacity to generate revenue and invest in long-term purposive activities to create an asset base for sustained economic development. In my view, policymakers or legislature need to ensure that such schemes are not politically motivated, but part of a wider tax reform. The writer is a human rights activist and a constitutional lawyer Published in Daily Times, March 14th 2018.