A prominent business leader today issued a stark warning that Pakistan’s industrial sector is facing a severe liquidity crisis following a Federal Constitutional Court judgement that green-lights the recovery of approximately Rs300 billion in Super Tax from the business community.
Mian Zahid Hussain, a veteran industrialist holding several key positions including President of the Pakistan Businessmen and Intellectuals Forum, expressed deep concern over the verdict. While respecting the judiciary’s supremacy, he cautioned the government that the abrupt collection of such a high-volume amount from the formal sector would stifle industrial growth and create unsustainable financial pressure.
The court’s decision upheld the legality of the Super Tax imposition under Section 4B and Section 4C of the Income Tax Ordinance. According to Hussain, this retrospective application on high-earning sectors effectively pushes the corporate tax burden to unmanageable levels, with the effective rate for compliant industries now approaching or exceeding 50% when combined with the standard 29% corporate tax and other levies.
“The formal sector is already bearing the brunt of the country’s revenue targets,” Mian Zahid Hussain stated. “By upholding the Super Tax, we are penalizing the most productive sectors of the economy including textiles, pharmaceuticals, fertiliser, and banking, which are essential for job creation and exports.”
He elaborated that the decision risks draining the retained earnings that industries depend on for crucial reinvestment, modernisation, and expansion projects.
The business leader highlighted specific challenges across key industries. For the textile and export sectors, already grappling with high energy tariffs and delayed refunds, the retrospective tax liability could wipe out liquidity needed for purchasing raw materials, further depressing export volumes.
For large-scale manufacturing, he noted that such harsh recovery methods send a negative signal about policy predictability to both local and foreign investors. Critical sectors like pharmaceuticals and fertilisers, which operate under regulated pricing mechanisms, lack the surplus profits to absorb the significant additional tax hit.
Hussain also argued that the tax imposed on exporters in the past under a fixed tax regime was considered a full and final settlement. Consequently, exporters did not include the impact of the Super Tax in their costs, and he contended they should not be forced to pay it for past periods.
Urging the government to proceed with extreme caution, Mian Zahid Hussain argued the state”s focus must shift from “squeezing the existing taxpayers” to broadening the tax base to include sectors like retail, real estate, and agriculture. “If the government continues to rely on Super Taxes and surcharges on the few compliant industries, we will see a further decline in Foreign Direct Investment (FDI) and a flight of capital,” he warned.
He concluded with a call for immediate dialogue between the government and the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) to devise a practical solution. He proposed a mechanism that would allow for the payment of past liabilities in installments over two years, include a 25% upfront discount, and permit adjustment against pending tax refunds to prevent widespread defaults and industrial closures.