Need for tax courts

Over Rs3.3 trillion worth of tax revenue claims in 90,000 different cases are tied up in litigation, according to FBR. The number came up during a meeting between top government officials and IHC Chief Justice Athar Minallah to discuss the pendency of cases involving trillions of rupees. Aside from the amount itself, FBR data showed that some 80% — over Rs2.5 trillion — of the claims are pending at internal forums such as collector commissioners and appellate tribunals, reflecting a surprising level of inefficiency for a revenue-generating body.

Almost 59,000 of the cases are pending before appellate tribunals, which are essentially the country’s tax courts. Another 19,000-plus cases are pending before collector commissioners, while the remaining 10,000-plus cases are pending before the Supreme Court and various high courts. The high court and Supreme Court cases involve about Rs700 billion. Interestingly, less than Rs90 billion was involved in cases with the customs appellate or customs collectors, which also reflects the problems in the mainline tax system.

As a general rule, tax authorities worldwide try to reform themselves into bodies that pay out promptly and make it as easy as possible for taxpayers to calculate and file taxes. The massive amount of pending litigation clearly indicates that, despite decades of tall claims, such is not the case here. There is also the problem of how the tax law court is structured. Whereas many countries have dedicated tax courts, ours is a hybrid system where at the lowest level, decisions are being made by civil service officers who may have little to no legal background, and at the highest levels, by judges who may have limited expertise relating to tax law. All of this contributes to the slow pace of case processing and other hiccups along the way.

On the other hand, the US has a dedicated tax court system that is equivalent to high courts, with judges having the relevant area expertise needed to quickly and fairly dispose of cases. Pakistan should look into developing a similar system if we are to introduce efficiency to the system.

Published in The Express Tribune, February 24^th, 2022.

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