Tuesday, July 14, 2009

The Supreme Court's Arbitrariness

It seems as if the showdown between the Iftikhar Chaudhry Supreme Court and the Zardari government has commenced. And the Supreme Court is spectacularly wrong and has far exceeded its authority.

In last month's budget, approved by Parliament, the government introduced a carbon tax on all petroleum products. This replaced a previous petrol levy and expanded its scope by applying to most petroleum products. Initially, the carbon tax was also levied on CNG but that was withdrawn in the final bill.

A three-member bench of the Supreme Court, including Iftikhar Chaudhry, temporarily withdrew the tax until it reached a final decision. In the same decison, the bench also said that the government could not remove a subsidy on electricity.

In retaliation, Zardari reimposed the petrol levy that had been replaced by the carbon tax through a presidential ordinance. This has also been challenged in the Supreme Court.

There are good reasons why the government introduced the carbon tax and withdrew electricity subsidies. We are reliant on the IMF and so have to agree to their demands, one of which is that the budget deficit should not exceed 4.6%. If the Supreme Court decisions are made permanent it will cost Pakistan an estimated $1.52 billion, taking the budget deficit to 4.9% and leading to a possible lending freeze from the IMF.

But even if this was not the case, what right does the Supreme Court have to tell the government which taxes and subsidies it can impose and withdraw? The carbon tax was part of the finance bill, was unanimously approved by the finance committee and passed by Parliament. There is nothing unconstitutional about it. I know indirect taxation has greater impact on the poor and imposing indirect taxes is taking the easy way out when the government should actually be working on widening the tax base, but if the Supreme Court holds that indirect taxation is against the public interest, it needs to be consistent and withdraw all such taxes, including the General Sales Tax.

It is the arbitrary nature of this decision that I find most galling. Iftikhar Chaudhry and the rest of the Supreme Court see themselves as a legislative body. They seem to have no regard for the rule of law and simply shoot down bills that are not to their liking.

It is likely that the Supreme Court will also rule against Zardari's petrol levy. They would be standing on firmer ground with that decision as the constitutionality of taxation imposed through presidential ordinances is dubious. It's just that a shame that Zardari was forced into that action by the Supreme Court's refusal to be bound by its functions and dutys.


13 comments:

Ahsan said...

Cyril Almeida has a great column on this very issue, well worth reading.

http://www.cyrilalmeida.com/2009/07/10/dawn-new-grounds-familiar-conflict-by-cyril-almeida/

Anonymous said...

a) The budget deficit is projected to be 4.9%, NOT 4.6%

b) The supreme court has every right to strike down any law it feels is detrimental to the fundamental rights of the people of pakistan, as enshrined in the constitution.

c)The government does NOT have a good reason for this specific tax. What about an agricultural tax or a capital gains tax? Oh shit, but that would only hurt the elite (you), won't it? Who likes giving a few crores away anyway?

c) The government admitted in court that the carbon tax was a 'mistake', conceding its culpability. Universally this tax is meant to correct the environmental effects of excessive fossil fuel use, in Pakistan it was being used to bridge the fiscal deficit. The petroluem levy has not yet been heard in court, so your prediction that it will be struck down has no basis.

d) In a country where an elected parliament can be arbitrarily dismissed and an elected Prime Minister can be arrested, or worse, hanged, this is minimal in terms of overstepping its jurisdiction by an institution ( if your thesis is accepted).

Anonymous said...

Pakistan has a population of around 160 Million, and when the Fuel is made expensive the life of the common people get more difficult.
Why you ---hole only thinking of getting lone from the lending organization, our country has a lot of potential it need to explore how to generate the revenue locally.
About the budget what measures are there for job creation and for the revival of the industries.
I saw Naveed Qamar on a TV show saying that if we reduce the number of advisers and reduce the expenditure it is not going to save a lot of money.
Why so many advisers are needed. And the person in Steel Mill fraud case is also having some post and her daughter is also an adviser of the Sindh govt.
I would request the author of the article check his/her mental state, can think about few thousand people and not millions.

bubs said...

Anon554:

a) The budget deficit is now projected at 4.9%

b) The Supreme Court has to be consistent and it has to follow the Constitution. Where does the Constitution not give the government the right to impose an indirect tax? And if they were consistent, they would strike down all indirect taxes.

c)Thanks for the personal attack. I'm a journalist and have no agricultural lands or stock market investments. If you read the post properly, I said indirect taxes hurt the poor more but just because we don't like something doesn't automatically make it illegal.

c)There is a difference between making a mistake and doing something illegal.

d) Wouldn't applying the law to an elected prime minister actually be a good thing (Please not that I mean this hypothetically, I am not defending the hanging of ZAB)? There is no justification for the Supreme Court giving legal cover to numerous coups. But just because they have done worse things, doesn't give them immunity from criticism for smaller issues. In fact, the two are related. When the Supreme Court approved Musharraf's coup, they did so because of its popularity. The same applies with the carbon tax.

Anon 636: I would request the commenter to this article check his/her grammar and think about logic not rhetoric.

karachi khatmal said...

to be fair, the supreme court now stands validated. because the government said the taz was a mistake, as cyril's article points out. secondly, i think that another issue was the government's sneaky attempt to call it a carbon tax. a part of the ruling found fault with the fact that the tax was going to be used for balancing the books, not for enviornmental protection.

in my eyes, it's fair because it teaches the democratic institutions to get their shit together.

the weakness of this post lies in the fact that we are not looking at the politician's decietful actions at all. the pml-n approved the budget, THEN decided to protest. as for the government, they're always using the same old cynical politics. i mean for fuck's sake tax the stock market, tax agriculture, or have the balls to call it the fuck-you tax, not the carbon tax.

the debate over whether the SC's actions were unconstitutional was struck down as soon as the government accepted the decision. and so at least the correct process is being followed, which could be very useful for building up institutions.

Anonymous said...

Bubs

b) Please note that the Supreme Court did not rule against the fact that the tax was regressive, it ruled against the fact that the terminology was wrong. You can't apply a tax for a particular reason and derive benefits for another. The PDL has been in force for several years but the Supreme Court hasn't struck it down. So it's not as if they're against the regressive nature of oil pricing.

Sorry for the personal attack. It was out of place. But most bloggers do come from the elite, and I find their intellectual banter about things like indirect taxation hypocritical to say the least.

c) Again, the government admitted in court that the tax was wrong, and withdrew it. How you can defend the government which admits that it is wrong is beyond me.

d) Again, your logic is wrong. You believe that the court acted because it didn't like the price hike, when in actuality, it acted because the government was misleading people with the terminology of the tax. The point I was trying to make is that when an institution goes out of its domain it is wrong, but even if the Supreme Court did go out this time ( which I don't believe it did) it pales in comparison to the acts by other institutions, particularly the military.

If my tone sounds sharp, I apologize.

bubs said...

Karachi Khatmal and Anon1120: To admit the tax was a mistake is not the same as saying it is unconstitutional. You can have bad laws but that does not make them unconstitutional.I agree that the government has accepted that the tax is unconstitutional by agreeing to the decision. I don't think they should have.
I totally agree that the government was prompted by financial rather than environmental concerns. But why can't the carbon tax achieve both? Demand for petroleum isn't completely inelastic and the carbon tax would have led to a decrease in consumption.

To be fair to the PML-N, they did protest the carbon tax before a petition was filed by the Supreme Court, they just didn't think it was important enough to vote against the entire financial package. I think that was the sensible thing to do.

I'm not so much defending this government as defending the right of any government to set taxation policy through accepted democratic means.

Anon, I agree with you on point d. This hardly the worst act by any institution or even this Supreme Court. Forcing the government to reduce oil prices a few months back was even worse, as they didn't even attempt to justify it on constitutional grounds. Again, I don't believe that environmental concerns matter at all to this government, but if the carbon tax reduces consumption can't it said to have fulfilled it's function? Trying to judge someone's intentions makes for terrible jurisprudence. For example, we can all agree that the NRO's sole purpouse was to prolong Musharraf's rule but the president's authority to grant pardons is absolute. If the SC court struck down the NRO because they didn't think Musharraf did it with the best intentions, that would set a terrible precedent.

AKS said...

The Carbon Tax was a sham, it was bad law and deserved to be struck down. But the Supreme Court's reasoning in the matter was even worse than the tax itself.

First and foremost, lets get one thing clear, the purpose of the Carbon Tax in most countries is not, as is often misrepresented, to generate revenues for environmental projects but to make polluting more expensive. The Carbon Tax is contrasted by tax waivers or even subsidies on green technologies - the perfect example of this is the toll tax on cars in Central London, its become ludicrously expensive to drive; however, if you have an electric car you're exempted from the provisions of this tax.

In Pakistan, the government continues to impose both import duty and sales tax on wind generators and solar cells. In addition there are no benefits given to companies to adopt cleaner technologies; conversely, there are no costs placed on those that pollute more.

There then was no coherency between the government's decision to impose a Carbon Tax, and as such this was a pretty bad policy.

But is bad policy, bad law? Of course not. Was this bad law? Of course. Every statute has an aim and objective, usually contained in the preamble and an interested party can approach the court to consider if those aims are being met by the application of the law. Now we all KNOW the government's intentions in imposing this law, but that knowledge in and of itself can be used as evidence against the law, e.g. we all KNOW OJ killed his wife but the court can't pass a judgment, it has to look at all the evidence.

The Supreme Court doesn't even attempt to gather any evidence or give weight to any arguments - the judgment was predetermined.

Worse is the fact that the Supreme Court chose to address issues of 'social justice' and 'fundamental rights.' This is not the language of an order addressing constitutionality of a federal tax. It is the language of a court that is addressing an incoherent governmental policy and seeing it fit to set the 'national agenda.'

The Supreme Court's reasoning was abysmal and sets a dangerous precedence. A Government should always be scrutinized by the Supreme Court to ensure that it doesn't take steps that are in conflict with the constitution and the law. But the Supreme Court has absolutely no authority to pass judgment on the merits and demerits of a government's policy - that's the job of the parliament.

Pagal_Aadmi_for_debauchery said...

The decision: http://www.supremecourt.gov.pk/web/user_files/File/CONST.P.33-34-2005.pdf

Pagal_Aadmi_for_debauchery said...

IMO, the decision is shockingly bad. I shudder to think what kind of decisions are given by lower courts in Pakistan.
The decision actually makes no sense whatsoever. The initial part of the decision looks like a set up to strike down the law on some administrative law technicality but that angle is never really picked up. Instead the decision is based on part in (no jokes) 'social justice guaranteed by the preamble of constitution'....WTF? Preamble? This must be an inside joke or something. Yes, the decision is also based in part on Articles 4 and 9 of the Constitution. There is of course no explanation given about those articles. In fact there is no explanation given period about any aspect of the decision. There is also some talk about this and that not being right, though they never give any reasons about why those actions are wrong. Thankfully the final decision will be taken by the Court after they get the report from the commission. I give the decision a solid D.

Anonymous said...

Thank God for brain drain. Your intellectual fantasies are suited to Western democracies, not Pakistan.

Muhammad.M said...

You must be bullshitting. The Supreme Court has aided and come to the aid of the common man. The budget made by this government is no more than a rich mans budget by agreeing to the IMF demands. All the loans are taken in the name of the common man but when its pay back time the common folk are made to pay for what the rich took in the form of loans but never reached the grass root level as it was upsurped by the rich. Tell all most all the representatives of the government are either industrialists, landlords, or pirs and millionaires. They have at every stage elected their family members to power and have shared all ministries amongst themselves. So the middle and the poor class do all the work and pay all the taxes while the rich never have to pay any taxes and are above the law. Have you seen the poor of Pakkistan and not in the cities I mean the remote villages. They hardly have enough to eat and dirty contaminated water to drink. Their voices are never heard and they have no rights whatsoever. Thier rich representatives in all these sixty years of independance have not been able to deliver in fact to make get foreign investment to expand their businesses they have devalued the currency but what efect will that have on the poor. Prices of commodities will increase and crime will increase.
God forbid if anything bad happens to Pakistan all these so called rich men most who have dual nationalities will take a plane and leave along with their assests which is already abroad, leaving behing the poor and the destitute to fight it out. A similar example is that of our neighbouring country Afghanistan where the elite eloped leaving behind the middle and poor class to defend the country later only to come back and crown themselves king. Today in this time we have no real representative excdpt the Supreme Court and some hardworking faithfuls who are ready to stand their ground and not let the sinister plans of these greedy politicians succeed. You must be leaving abroad with only your eyes and ears stuck to the TV getting information and making your own decision and opinions. The price of LPG is increased and that of CNG decreased say what they may but the truth of the matter is that CNG is used mostly in the upper class vehicles while LPG is used mostly by the middle and lower class. So the poor and being drained even more than required.
Why is it that our so called patriotic politicians are begging from the IMF the World Bank and from the friends of Pakistan loans to run this country. Why dont they bring in their own money, by investing in this country, setting up industries employing the youths, creating opportunities in this land of ours. Never as they dont believe in the future and in the construction of this country. We are bulldozed by everyone. Developed countries walk in and out meet this and that with out any criteria and performa and one should see out politicians doing the dance to their tunes. Are we that down cast and downtrodden that we cannot stand up to them and say enough is enough..... Today if the Supreme Court stands for its citizens what is harm especially when the representatives of the people are squeezing the people of every little bit that they have got.

Anonymous said...

You must be bullshitting. The Supreme Court has aided and come to the aid of the common man. The budget made by this government is no more than a rich mans budget by agreeing to the IMF demands. All the loans are taken in the name of the common man but when its pay back time the common folk are made to pay for what the rich took in the form of loans but never reached the grass root level as it was upsurped by the rich. Tell all most all the representatives of the government are either industrialists, landlords, or pirs and millionaires. They have at every stage elected their family members to power and have shared all ministries amongst themselves. So the middle and the poor class do all the work and pay all the taxes while the rich never have to pay any taxes and are above the law. Have you seen the poor of Pakkistan and not in the cities I mean the remote villages. They hardly have enough to eat and dirty contaminated water to drink. Their voices are never heard and they have no rights whatsoever. Thier rich representatives in all these sixty years of independance have not been able to deliver in fact to make get foreign investment to expand their businesses they have devalued the currency but what efect will that have on the poor. Prices of commodities will increase and crime will increase.
God forbid if anything bad happens to Pakistan all these so called rich men most who have dual nationalities will take a plane and leave along with their assests which is already abroad, leaving behing the poor and the destitute to fight it out. A similar example is that of our neighbouring country Afghanistan where the elite eloped leaving behind the middle and poor class to defend the country later only to come back and crown themselves king. Today in this time we have no real representative excdpt the Supreme Court and some hardworking faithfuls who are ready to stand their ground and not let the sinister plans of these greedy politicians succeed. You must be leaving abroad with only your eyes and ears stuck to the TV getting information and making your own decision and opinions. The price of LPG is increased and that of CNG decreased say what they may but the truth of the matter is that CNG is used mostly in the upper class vehicles while LPG is used mostly by the middle and lower class. So the poor and being drained even more than required.
Why is it that our so called patriotic politicians are begging from the IMF the World Bank and from the friends of Pakistan loans to run this country. Why dont they bring in their own money, by investing in this country, setting up industries employing the youths, creating opportunities in this land of ours. Never as they dont believe in the future and in the construction of this country. We are bulldozed by everyone. Developed countries walk in and out meet this and that with out any criteria and performa and one should see out politicians doing the dance to their