Need for National Tax Court

Law Reform Report No 142 of the Law and Justice Commission of Pakistan proposes an International Commercial Court of Pakistan as a specialised Federal Superior Court. Crucially, Clause (3) of the draft Article 212A expressly permits parliament to confer original or appellate jurisdiction over "taxation" and other economic and commercial matters.

That opening should not be treated as drafting surplusage. Pakistan's tax jurisprudence is now too economically consequential, technically complex and internally contested to remain dispersed among departmental appellate authorities; two tax tribunals, five High Courts, the Federal Constitutional Court (FCC) and Supreme Court. The recent super-tax litigation illustrates the problem. In January 2026, the FCC upheld Sections 4B and 4C of the Income Tax Ordinance, 2001 ["the Ordinance"]. Its detailed judgment treated Section 4C as a standalone tax on a composite concept of "income", capable of reaching income otherwise falling under normal, final, minimum and separate-block regimes. The FCC expressly held that dividend, profit on debt and capital gains could enter the Section 4C base even where the ordinance otherwise treats them under special charging provisions. For exporters under the then final tax regime, it accepted the "imputable income" mechanism under Section 4C(2)(iii), grossing up final tax to derive an income figure for super-tax purposes.

The reasoning is consequential. Export proceeds for tax years 2022 and 2023 were taxed under Section 154 as final tax based on receipts. Dividend income is specifically charged under Section 5, while Section 8 declares the tax imposed under Section 5 to be final and keeps that amount outside the computation of taxable income under the ordinary heads.

The FCC nevertheless reasoned that Section 4C does not tax these streams twice; it counts them once for a distinct super-tax charge. In the case of exporters, it expressly held that the imputation mechanism brings a final-tax-regime exporter into comparability with a normal-regime taxpayer. That construction may be defended as giving effect to parliament's express inclusion of dividends and imputable income in Section 4C(2). It nevertheless raises a serious issue of statutory coherence: what does "final" mean if another income tax can subsequently be imposed upon the same separately treated stream without an express overriding clause? Will any foreign direct investment come after such erratic over-taxation!

The issue became sharper in July 2026 when the Supreme Court decided Commissioner Inland Revenue vs Saudi Pak Industrial & Agricultural Investment Company and connected matters. A bench comprising Chief Justice Yahya Afridi and Justice Aqeel Ahmed Abbasi rejected the tax department's attempt to tax corporate dividend income at the normal corporate rate under Section 39 of the Ordinance. Justice Abbasi, writing for the court, held that dividend constitutes a separate block of income governed by the specific charging provision in Section 5. Section 39 is residual; machinery provisions cannot dilute a substantive and specific charge.

The Saudi Pak judgment did not discuss Section 4C. However, the interpretive principle it reiterates is important: where parliament has created a specific charging regime, courts should not lightly permit other provisions to destroy its statutory character. Applying this principle, FCC may review its judgment to this extent while deciding thousands of pending review petitions. This is precisely why Pakistan needs specialised tax adjudication. Complex tax disputes are not merely arguments about rates. They require simultaneous command of charging provisions, computation rules, final-tax regimes, accounting concepts, constitutional legislative entries, retrospective taxation, international transactions and the relationship between general and special provisions.

A court deciding these matters must also understand that certainty itself is an economic asset. The proposed Article 212A provides a constitutional route. Instead of creating an International Commercial Court concerned primarily with cross-border contracts and arbitration, parliament should use Clause (3) to establish a specialised taxation division – or, preferably, a National Tax Court within the same constitutional architecture. The commission itself envisages expansion of the proposed court's jurisdiction to taxation and other economic matters. Such a court should absorb the appellate jurisdiction presently fragmented between the Appellate Tribunal Inland Revenue and Customs Appellate Tribunal, with judges selected for demonstrated expertise in taxation, commercial law and accounting. This is not an argument for another layer of litigation. The opposite is required. The appellate chain should be shortened. Fact-finding should terminate at the specialised forum; only substantial questions of law should travel further through a tightly defined route to the National Tax Court. Identical federal tax provisions should not acquire different meanings merely because proceedings originated in Karachi, Lahore, Peshawar, Quetta or Islamabad.

The super-tax controversy teaches another lesson. Tax law cannot become predictable merely by declaring parliament supreme in fiscal policy. Parliament unquestionably levies taxes. Courts still have to determine what parliament actually enacted, how one charging provision interacts with another, whether retrospective legislation disturbs vested or past-and-closed transactions, and whether constitutional limits on legislative competence have been crossed.

Indeed, the FCC itself subsequently struck down Section 7E after holding that, in substance, it was a tax on the capital value of immovable property falling outside federal legislative competence. That judgment demonstrates an elementary but vital principle: the label attached to a tax cannot determine its constitutional character; substance must. Pakistan does not need a National Tax Court to collect more for the state or to grant more relief to taxpayers. It needs one to produce coherent law. Proposed Article 212A offers an opportunity to create that institution before another generation of tax disputes travels from assessment to tribunal, High Court, constitutional court and/or Supreme Court. The test should be simple: one federal tax law should produce one authoritative interpretation across Pakistan. Tax certainty is not a concession to business. It is part of the rule of law.

The writer is the Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences, member Advisory Board and Visiting Senior Fellow of PIDE