The Institute of Chartered Accountants of Pakistan (ICAP) has proposed the establishment of a separate bench dedicated to tax cases at all higher courts.
ICAP presented these recommendations for the budget 2023-2024 to the Federal Board of Revenue (FBR), highlighting the complexities faced by taxpayers in various appellate forums. The aim is to expedite the resolution of tax disputes and ensure a more efficient and independent judicial process.
Challenges in Current Dispute Resolution System: ICAP pointed out that tax disputes can arise under both local tax laws and tax treaties, creating complications for taxpayers. The available options for dispute resolution include the appellate forum, such as Commissioner Appeal and the Appellate Tribunal, the High Courts, the Supreme Court, and alternate dispute resolution mechanisms. However, the current process is lengthy, leading to significant delays in resolving disputes. In some cases, particularly those involving multinational corporations with substantial foreign investments, disputes remain undecided for five years or more.
Impact on Businesses and the Need for Rapid Resolution: The absence of a rapid dispute resolution mechanism not only becomes a costly affair but also hinders the routine operations of businesses. In situations where disputed taxes are recovered through coercive measures or bank accounts are attached, the operations of businesses are affected unless prevented by an order from the appellate forum. This issue poses a significant obstacle to business continuity and investment.
Proposed Steps for Rapid Tax Dispute Resolution: To address the challenges faced by taxpayers and ensure faster resolution of tax disputes, ICAP recommends the following steps:
1. Independence of Appellate Forums: The appellate forums, including Commissioner Appeals and the Appellate Tribunal, should be declared entirely independent to ensure impartiality and fair decision-making.
2. Establishment of Separate Bench at High Courts: ICAP suggests the creation of a separate bench at all high courts exclusively dedicated to hearing tax cases. This specialized approach would enhance the efficiency and expertise in dealing with tax-related matters.
3. Independent Permanent Body for Alternate Dispute Resolution: ICAP proposes the establishment of an independent permanent body for alternate dispute resolution, endowed with full decision-making powers across all types of disputes. The decisions made by this body should be binding on the tax administration, ensuring a fair and efficient resolution process.
4. Restructuring of Commissioner Appeals and the Appellate Tribunal: ICAP recommends bringing the office of Commissioner Appeals under the Ministry of Law & Justice and placing the Appellate Tribunal under the jurisdiction of the High Courts. Such restructuring would enhance transparency and accountability in the appeal system.
5. Publication of Decisions: To build taxpayer confidence in the appeal system, ICAP suggests publishing all decisions made by Commissioner Appeals and the Appellate Tribunals. This transparency measure would promote fairness and provide guidance to taxpayers.
ICAP’s proposal for a separate bench for tax cases at higher courts and other recommendations aim to streamline the tax dispute resolution process in Pakistan. Rapid resolution of tax disputes would benefit taxpayers, reduce financial burdens, and foster a favorable environment for businesses. Implementing these measures would enhance the efficiency, transparency, and independence of the judicial system, ensuring a fairer and more effective resolution of tax-related matters.