Guge Taxpendency, Economic impact and the way-forward
The Supreme Court has taken notice of a report which revealed the details of the pending tax litigation at different forums including High Courts and Supreme Court involving more than three trillion of rupees.
As per data presented by the Federal Board of Revenue during a meeting on the pendency of tax cases that there are total, 90,426 tax cases are pending at different forums including High Courts and Supreme Court involving 3,03,340 million revenue involved.
Out of the Rupees 3.5 trillion, Rs 2, 556 billion tax matters are pending at the level of two first adjudication forums i.e. Appellate Tribunals both inland and Customs, and Commissioner Appeals and Collector Appeals with pendency of 58,937 of total tax matters before Appellate tribunals involving 950 billion rupees tax revenue, and 19,523 out of total cases are bending before Commissioner and Collector Appeals involving 1.606 billion rupees tax matters.
The report further revealed that there are 2,959 tax cases are pending in Supreme Court, 1,298, tax cases before Islamabad High Court, 2,238 tax cases before Sindh High Court, 5,133 tax cases before Lahore High Court, 317 tax cases before Peshawar High Court and 21 tax cases before Balochistan High Court.
The present notice by Honourable Chief Justice relating to the pendency of tax cases before different forums is first of its nature and would have a long-lasting effect towards resolution of tax cases pending throughout the country before different forums and courts.
Such tax pendency of cases is one of the largest in the region which not only gives bad effect towards implementation of tax initiatives, recoveries and even some time these tax propositions would come before the Courts after many years of first legal assessment or tax propositions eventually lasting its effect.
There are many factors behind such huge tax pendency throughout country before different adjudicating forums and the superior courts only could not be blamed as there is almost more than 70/% tax demands either are pending at first or second tax adjudicating tax forums (Appellate Tribunals and Commissioner and Collector Appeals), thus this area needs to be strengthened and given priority for all purposes through legislation in Income tax, Customs, Sales tax and Federal Excise laws and to provide them proper infrastructure, ensuring technology and to as well maintain their conceptual and practical neutrality by appointing independent legal professionals through substantial amendments in law, so the real work on questions of law should go to Superior Courts.
This should be an eye-opener for the policy makers to rectify both on administrative and legal sides on priority; otherwise this state of affairs would continue as earlier and would cause many difficulties in future to increase the ratio of tax to GDP and to get out from IMF monetary assistance.
The present tax collection system and out of which the huge litigation filed and pending before different adjudicating forums by taxpayers also identifying the status of credibility of present working of tax systems.
This should be an eye-opener for the policy makers to rectify both on administrative and legal sides on priority; otherwise this state of affairs would continue as earlier and would cause many difficulties in future to increase the ratio of tax to GDP and to get out from IMF monetary assistance.
FBR should conduct a study and undertake forensic audit about this state of huge tax pendency and to take legal measures on priority.
It would be more important that instead to only highlight the issue by FBR on such huge tax pendency, this Should be addressed with doable recommendations with way forward relating to courts and tax adjudicating forums and to address especially the genuine concerns and issues of taxpayers relating to the appointment and timeline proceedings of first Assessing officers of tax cases, the adjudicating Commissioner Appeals inland revenue and Collector Customs Appeals and of both Appellate tribunals, so the minimum real tax work should go to the High Courts and Supreme Court for their final determination.
The issue of capacity building within FBR should be addressed on priority both at the time of passing on first assessment orders and representation of their cases before adjudicating forums including before Superior Courts.
The role of Alternate Dispute Resolution (ADR) would also be very important for early resolution of long awaited tax matters and to design a robust system to Stream lining the tasks of Alternative Dispute Resolution Committees and its effective monitoring as suggested and mentioned in all tax laws (Customs, Federal Excise, Sales tax, and Income tax laws), and in that way unnecessary litigation could also be avoided and courts burden could be minimized.
There is also a need to design a strategy to prioritize the litigation relating to tax positions and its revenue and legislative impacts, and for addressing and implementing quarterly meetings of all the relevant forums and courts should be held and to take special measures to highlight first all tax cases where the Stay Orders has been granted in revenue matters by Superior Courts under Article 199 of Constitution where statutory period of six months has elapsed.
It would also be important to introduce such tax innovative legislation in Income tax, Customs, Sales tax and Federal Excise laws which provide simple procedure for tax collection, the process of first assessment & adjudication and finally the timeline for tax adjudication and decisions up to the Supreme Court.
Also important would be to ensure neutrality and competency through appointments of independent legal professional’s background at first Appeal stage and in Appellate Tribunal, this would give confidence to taxpayers and would provide qualitative judgments resultantly minimize unnecessary courts litigation.
It would also be important as well to implement the mandatory timeline to decide tax cases by every adjudicating forum under the relevant tax law and to request the Supreme Court and High Courts as well to suitably amend their Rules and Orders.
All the above is required through complete legal strategy, coordination with passion for timeline implementation.
