Karachi, November 14, 2024 – The Pakistan Tax Bar Association (PTBA) has expressed significant concerns regarding the Tax Laws (Amendment) Act, 2024, questioning its effectiveness in streamlining tax-related litigation and ensuring taxpayers’ rights.
In a letter addressed to Azam Nazeer Tarar, the Minister of Law and Justice, the PTBA has highlighted several issues that have emerged since the law’s implementation six months ago. The organization claims that instead of addressing inefficiencies in the tax litigation process, the act has added further complications, particularly in the functioning of the Appellate Tribunal Inland Revenue (ATIR).
Amendments in the Appeal System and the Rationale Behind Them
The Tax Laws (Amendment) Act, 2024, introduced structural changes to the appellate system, including adjustments to the pecuniary jurisdiction across the tax laws governed under the Income Tax Ordinance, 2001; Sales Tax Act, 1990; Federal Excise Act, 2005; and Customs Act, 1969. This shift aimed to expedite tax-related litigation processes, with the ultimate goal of resolving cases stuck in litigation—estimated to total approximately Rs 2.7 trillion.
The PTBA has reported that the well-established protocol, which allowed only legal questions to be referred to high courts, was disrupted. The amendments proposed recruitment of new members to the ATIR, offering competitive salary packages to attract qualified individuals. However, six months later, PTBA members report little to no improvement in the resolution of pending cases, and the appellate forums, especially the ATIR, are perceived as increasingly dysfunctional.
PTBA’s Key Concerns: Reality Check on the Act’s Performance
PTBA’s letter raises several critical questions, casting doubt on whether the goals of the Tax Laws (Amendment) Act have been achieved. One of the primary questions relates to the effectiveness of tax adjudication processes post-enactment. The PTBA inquires about the number of cases that have been adjudicated, the decisions made in favor of taxpayers versus tax authorities, and the volume of cases remanded for re-adjudication. Furthermore, the PTBA points out the growing backlog of cases where judgments have been reserved but not issued, with no clear explanation provided.
The PTBA also draws attention to the underwhelming progress in recruiting ATIR members. Despite assurances, the ATIR’s branches across Karachi, Lahore, Islamabad, and Peshawar are operating below capacity. For example, in Karachi, only four members (three accountants and one judicial member) are present, though the sanctioned number is 12 (six accountant and six judicial members). This staffing shortage, according to PTBA, is causing delays, disrupting hearings, and impacting the quality of adjudication.
Concerns Over Working Hours and Judgement Delays
A major grievance expressed by PTBA members pertains to the ATIR’s working hours. While tribunals in Sindh were expected to adopt the working hours of the Sindh High Court, starting at 8:30 a.m., PTBA reports that ATIR benches commence hearings around 11:00 a.m., with proceedings lasting until 3:00 p.m. Consequently, many cases are left unresolved, while judgments are often delayed or lack sufficient detail. Adding to the confusion, short-term orders for extending stay applications are recorded as “disposals,” misleadingly inflating case resolution statistics. PTBA has called for a comprehensive report on post-May 2024 tribunal cases to verify these claims and evaluate the act’s impact.
Increased Appeal Fees and Reduced Tribunal Benches
The amendments also included a significant hike in appeal fees, justified by the promise of an expanded ATIR bench structure with highly qualified members selected through a transparent process. However, PTBA has observed a reduction in functional benches; Karachi, for instance, now operates with only three benches instead of the previous six. PTBA members report deteriorating confidence in the ATIR’s ability to provide impartial and fair rulings. This lack of trust is described as a “disaster” for judicial proceedings under tax laws, with taxpayers and legal professionals increasingly frustrated.
Alternate Dispute Resolution and the Need for Procedural Reforms
The PTBA also pointed out that the ATIR has failed to promote Alternate Dispute Resolution (ADR) mechanisms, as mandated by Section 132 of the Income Tax Ordinance, 2001. The tribunal is required to inform taxpayers of ADR options during the first hearing, but PTBA reports that this provision is not being implemented, with almost no cases referred to ADR. This lapse has prevented taxpayers from exploring faster, less costly alternatives to conventional litigation.
Backlog of Appeals and Delays in Commissioner Inland Revenue (Appeals) Decisions
Another key issue raised by PTBA is the mounting backlog of appeals at the Commissioner Inland Revenue (Appeals) level. Even when cases are adjudicated, they are frequently remanded for further review, contributing to an unending cycle of delays. The scarcity of operational Commissioner Appeal positions compounds the problem, further slowing the appellate process and creating bottlenecks that undermine the act’s intended purpose.
Unresolved Older Cases: Prioritization of Recent Appeals
The PTBA has criticized the ATIR’s prioritization of newer cases from 2024, which it says is pushing unresolved cases dating back to 2014 further down the queue. This approach, they argue, is unfair to taxpayers who have waited years for a resolution, only to be bypassed by recent cases. The PTBA suggests an honest assessment of the tribunal’s performance in this regard, asserting that the ATIR has “miserably failed” to deliver on the act’s promises of streamlined processes.
Recommended Amendments and PTBA’s Plea for Oversight
In addition to highlighting grievances, the PTBA has proposed several amendments to the tax laws to alleviate taxpayer hardship. Key recommendations include:
1. Reviewing the Appeal Pathway: The PTBA suggests re-evaluating the requirement for taxpayers with lower tax demands to file appeals with high courts. Instead, they recommend permitting appeals before the tribunal.
2. Discretion on Reference Fees and Payment Conditions: PTBA recommends removing or allowing judicial discretion on the mandatory payment of a 30% reference fee under Section 133 (10) and a Rs. 50,000 fee as stipulated in Section 133 (12) of the Income Tax Ordinance, 2001.
The PTBA has urged the Law Minister to establish an oversight committee to address these systemic issues and accelerate the recruitment of qualified tribunal members. They emphasize that further delays will erode taxpayers’ fundamental rights to a fair trial and undermine confidence in Pakistan’s tax appellate system.
By voicing these concerns, PTBA remains committed to supporting the improvement of judicial institutions to ensure that taxpayers receive impartial, efficient, and accessible justice.
