The life and times of the Super Tax

The Super Tax was born, contested, buttressed, and then finally abandoned (for some). If there’s anything that points at the heart of Pakistan’s taxation issues, it is the heavily contested life of this tax.

The roots of the super tax were laid in 2015, where it was imposed to collect funds to rehabilitate the IDPs, created by the operation Zarb-e-Azab. Yet since then, the government extended and expanded it, and continued to use it as an avenue of revenue. The major push came in 2022, with the Finance Bill of that year amending the Income Tax Ordinance, 2001.

What this became essentially was a double tax. Companies and eligible individuals falling in certain income slabs had to pay tax on their incomes, and then another tax or surcharge on that income if it exceeded certain thresholds. The maximum possible tax rate was set at 10 percent, and given that the normal corporate tax rate in Pakistan was 29 percent, this effectively meant that companies could be paying nearly 40 percent of their incomes (not profits) in taxes.

Companies, expectedly, took the government to court on this issue. By the end there were over 2000 cases filed against the super tax, alleging its non-constitutionality. Initially the companies put their case to the provincial high courts, which effectively watered down – and in some cases struck – the double tax as non-constitutional. The case was then referred to the Federal Constitutional Court, which in a controversial decision in January 2026, upheld the super tax as constitutional. 

Yet, even as things appeared to be becoming settled, albeit a portentous calm, the government decided to abolish the super tax on certain slabs in the latest budget, and reduced the rate on certain slabs. It appears that the government is finally listening to reason, but given the opportunity it offered the government to extract tax revenue, it has to look elsewhere, since broader tax reforms still seem part of an unlikely future. And pending large scale reforms to bring the vast parts of undocumented economy into the tax net, the government will still be looking for some easy way - one like the super tax - to finance its collection shortfall.