ADR system proposed to streamline tax litigation
Income tax collection was about Rs335 billion more than the target, offsetting the impact of missed sales tax and customs duty targets. photo: file
A committee formed by the Supreme Court to resolve tax cases has recommended establishing a robust alternative dispute resolution (ADR) mechanism within the Federal Board of Revenue and all provincial revenue departments.
The committee, comprising the Supreme Court registrar and experts in legal and tax matters, has also suggested that ADR decisions be made binding on revenue authorities to prevent unnecessary litigation.
The government has expressed concern over the large number of pending revenue-related cases in the courts, involving billions of rupees. This not only deprives the government of critical revenue but also adds to the judiciary's backlog.
To mitigate the situation, Chief Justice Yahya Afridi chaired a meeting on November 7, 2024. It was revealed that 108,366 such cases were pending in the country's high courts, involving Rs4,457 billion.
Additionally, about 6,000 revenue cases were pending in the Supreme Court, while 2,000 cases remained unresolved in various tribunals and courts, where stay orders had stalled potential recoveries worth billions of rupees.
The objective of the November meeting, which was also attended by officials from the finance ministry and the FBR, was to develop a comprehensive strategy to expedite the resolution of revenue-related cases across judicial forums.
The meeting formed a committee, with tax expert Imtiaz Ahmed Khan as its coordinator. It included Supreme Court Registrar Saleem Khan, Asim Zulfiqar, Sher Shah Khan, Ishtiaq Ahmed Khan, FBR's director general, law, and others.
The committee was tasked with reviewing the matter, identifying problems and making recommendations. The committee was also directed to suggest suitable solutions in the context of the situation in the country.
To fuflill this mandate, the committee consulted key stakeholders, including the FBR, the Supreme Court Bar Association, the Punjab Tax Bar Association, the Federation of Pakistan Chambers of Commerce and Industry, and other business and industry representatives.
Based on stakeholder input, the committee recommended establishing a special ADR panel within the FBR to reduce litigation through mediation, conciliation and negotiation.
The committee also suggested that the FBR should not have the authority to appeal ADR decisions in any court. It also proposed setting up an ADR unit within the Supreme Court to monitor the ADR systems in the FBR and other state institutions.
To reduce the judiciary's burden, the committee recommended the creation of special benches for revenue cases in the Supreme Court and the high courts, with judges instructed to decide the cases quickly.
The committee said that a lot of time is wasted in legal proceedings because cases of similar nature are heard in different benches. Therefore, it said, all such cases should be consolidated and presented before a single bench for uniform decisions.
It is pointed out in the recommendations that revenue officials routinely file appeals against the judicial orders, even though they have a weak legal position in that matter out of fear of the National Accountability Bureau (NAB).
This unnecessary appeal culture is putting unnecessary pressure on the judicial system and increasing legal expenses for both the state and the taxpayers, the committee said in its recommendations.
To end this trend, it continues, the FBR and provincial revenue authorities should be directed not to file unnecessary appeals, and disciplinary action should be taken against the concerned officers, considering this violation as lack of performance.
It also suggested streamlining the appointment of officers in the relevant appellate tribunals of the FBR and introduction of key performance indicators to assess the performance of those officers.
The committee also made recommendations regarding the issuance of stay orders in the tax matters. It said that judicial forums should dispose of cases within the legally stipulated time.
The chief justice of Pakistan has been requested to consider increasing the number of judges keeping in mind the complaints of bar associations and taxpayers, improving the case management, streamlining court procedures.
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