Page last updated at 06:48 GMT, Wednesday, 8 July 2009 07:48 UK

Pakistan court cuts new oil tax

Petrol pump in Pakistan
The carbon tax was challenged by citizens

Pakistan's Supreme Court has slashed a new carbon tax imposed on oil by the government, bringing down oil prices by more than 10%.

The court order is temporary, pending a decision on petitions opposing the tax and withdrawing of power subsidies.

If the order is upheld, the government will lose $1.52b in revenues during the fiscal year ending this June. The budget deficit will also widen.

The court order has renewed a debate on "judicial activism" in Pakistan.

The BBC's M Ilyas Khan in Islamabad says the debate is over the extent to which the judiciary can intervene in the affairs of the executive without undermining the latter's ability to perform its functions.


Tuesday's Supreme Court order slashing the tax was issued by a three-member bench of the court, headed by Chief Justice Iftikhar Mohammad Chaudhry.

The order came a day after it issued another temporary injunction preventing the government from withdrawing over 50 billion rupees ($625m) worth of subsidies on electricity.

Together, the two measures will create a revenue shortfall of nearly 200 billion rupees in the current budget.

Prime Minister Yousuf Raza Gillani said he favoured "judicial activism", but added that the government would present its side of the case before the court during forthcoming hearings.

Many point out that the carbon tax - an environment tax levied on carbon emissions - was made part of the oil price through a finance bill that the parliament approved unanimously last month.

Any alterations to the bill amount to judicial interference in the affairs of the parliament which is the supreme law making body, they say.

Others say that under the Pakistani constitution the higher judiciary has the powers of judicial review - it can strike down a law passed by parliament which it finds to be in contravention of the provisions of the constitution and the citizens' rights guaranteed therein.

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