Daily Times

The recent suo moto actions the Supreme Court of Pakistan has taken on many issues relating to the violation of fundamental rights guaranteed in Pakistan’s constitution have raised many eyebrows, and have even been met with open resentment by federal and provincial governments.

As violators of basic rights, these governments have not only shown little respect to the mandate voters have given them, but have also accused the apex court of “encroaching” on executive authority.

The critics of the Supreme Court’s actions should be reminded of the fact that all successive governments in Pakistan — civil and military alike — have been levying all kinds of taxes on the people, but have utterly failed to provide the right to a decent living to citizens. This was explained brilliantly in a landmark judgement titled Ms Shehla Zia & Others v WAPDA & Others PLD 1994 SC 693.

The tax system is a fundamental element of a constitutional democracy. The important questions such as who is to be taxed and how much, and for what purposes, are to be decided while following democratic norms.

How tax obligations are to be imposed, administered and enforced are constitutional questions. The imposition, administration and enforcement of taxes, moreover, entail issues related to the rule of law, the proper division of powers, and to the role of the judiciary.

The power delegated to the executive branch for levying taxes or granting exemptions has already been declared ultra vires by the Supreme Court in the case Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi versus Federation of Pakistan and Others. Despite this, the FBR continues to indulge in this practice

It is a well-established principle that Parliament alone should impose taxes, and these taxes should not violate fundamental rights. In other words, they must not be confiscatory or exploitative.

Contrary to what is propagated by governments and by foreign donors, Pakistanis are some of the most heavily taxed people in the world. The oppressive and expropriatory taxation in two sectors — petroleum products and telecom — vindicates this claim. The Supreme Court has, thus, rightly taken notice of the overburdening of consumers through the excessive taxation in these two sectors.

Pakistan’s telecom sector is the second highest taxed telecom sector in the world. In fact, the cumulative effect of the sales tax provinces have imposed on services, the excise duty on charges imposed by companies, activation fees and advance adjustable income tax is as high as 42 percent to 45 percent.

These taxes on consumers coupled with the high corporate tax imposed on telecom companies, discourage investors which has resulted in low third and fourth generation penetration. Despite this, our economic wizards are more interested in highlighting inflated tax revenues.

The rate of the tax charged on petroleum products, moreover, can best be described as cruel. In a report the Rana Bhagwandas Commission submitted to the Supreme Court in 2009, it was revealed that from 2002 to 2009, the government collected Rs 10.23 trillion in taxes on Petroleum, Oil and Lubricants (POL) products.

A tiny fraction of this substantial amount could have significantly improved public transport, and the environment and infrastructure required for growth. Instead, this revenue was used by governments to bridge the fiscal deficit that emerged because of the lavish spending of elites.

The power delegated to the executive for levying taxes or granting exemptions has already been declared ultra vires by the Supreme Court in the case Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi versu Federation of Pakistan and Others [(2013) 108 TAX 1 (SC Pak)]. Despite this, the FBR continues to indulge in this practice.

The Supreme Court, in suo moto cases on taxes on POL products should consider this matter. It is highly lamentable that although the ordinary people of Pakistan have paid taxes of nearly Rs 3500 billion during the first ten months of the current fiscal year (the figure was just Rs 120 billion in 1993-94), the FBR continues to label them as ‘tax evaders’.

How public representatives and the civil-military bureaucrats plunder the country’s public coffers is an open secret. In our country, the state has simply failed to protect the life and property of the people, and has also failed to meet the basic needs of health, education and of civic amenities.

Over-taxation to the extent of expropriation is Pakistan’s real dilemma. Collection of unjust taxes is no answer to resolving existing maladies. On the contrary, these taxes only exacerbate present issues. The rising internal and external debt, moreover, is fast becoming a security threat since economic destabilisation can lead to the dismemberment of a state, as was evinced by the demise of the erstwhile USSR.

Excessive taxes imposed on mobile users and on POL products are not only irrational but also unconstitutional. Taxes should be levied to achieve the cherished goal of social justice, equity, prosperity and self-reliance. A tax policy should tackle the problems of unemployment and poverty. Taxes must fund free medical and educational facilities, low-cost housing, and clean drinking water in rural areas, land improvement schemes, and employment guaranteed programmes.

Once people see the tangible benefits of the taxes they pay, they will have a greater incentive to pay these taxes. The government must demonstrate through its actions that the money it is collecting is being spent on improving public welfare. This, after all, is the requirement of the supreme law of the land.

The writer is Advocate Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com; Twitter: @drikramulhaq

Published in Daily Times, May 13^th 2018.