In any society, administration and dispensation of justice should be the top most priority. A society without a sound, reliable and speedy judicial system, which does not ensure effective dispensation of justice, cannot survive for long. Administration and dispensation of justice under the various tax laws in Pakistan need serious attention, the entire system being on the brink of disaster.
There is an urgent need to ensure "justice", "rule of law", "fairness", "equity" and independence of appellate authorities from the control of administration. The present tax dispute resolution system, based on conventional appeal and review system under various tax statutes, is on the verge of collapse.
Everybody is dissatisfied with it. Those imparting justice complain of lack of facilities and mounting number of cases, while litigant taxpayers cry out for early orders but are forced to wait for years (sometimes decades), and the revenue department keeps worrying about the blockade of colossal amounts of money in litigation process.
The present pathetic state of tax administration can be measured from the fact that every year over 25,000 writ petitions/appeals are filed in Pakistan against orders of the tax authorities. Litigants have to wait for years to obtain appellate orders. On the contrary, in developed countries, only a few cases go to higher courts. A case in point is the United Kingdom where the number of income tax payers alone is 30 million whereas appeals reaching the Lord Chancellor in a year number only around 30.
This confirms the tremendous public satisfaction with the credibility of the system and good governance by fiscal administration. In Pakistan, we have barely two million registered income tax payers (around 1.3 million file returns) and around 65000-80000 sales tax registered parsons (active filers are about 35,000), but the number of appeals filed annually is in thousands.
Appellate authorities, as a matter of law and principle, should be independent in the true sense of the word. The honourable apex court of Pakistan has elaborated this principle in Government of Balochistan v Azizullah Memon PLD 1993 SC 31 by holding that "separation of judiciary from executive is the cornerstone of independence of judiciary".
The right of access to justice to all is a well-recognised inviolable right enshrined in the Constitution of Pakistan. It concludes that "the right to be treated according to law, the right to have a fair and proper trial and right to have an impartial court or tribunal. Justice therefore can only be done if there is an independent judiciary which shall be separate from executive and not at its mercy or depend on it" - PLD 1982 SC 146. It is a matter of record that none of the governments in Pakistan, military or civilian, has ever followed the directions of the honourable apex court.
In the given Pakistani political milieu, it is imperative that all the judicial and quasi-judicial authorities working in tax appellate system should be regulated and supervised by the high courts under whose territorial jurisdiction they work. This is the only way to ensure independence of judiciary in its true substance and constitutional requirement [Article 203]. In Para 5 of the National Judicial Policy 2009 [hereinafter "NJP 2009] it was directed that:
"All special courts/tribunals under the administrative control of Executive must be placed under the control and supervision of the Judiciary, their appointments/postings should be made on the recommendation of the Chief Justices of concerned high courts" [Page 12]
It was imperative for the government to implement the above directions and restructure the existing tax appellate system, but it has failed to do so even after a lapse of two years. If in Finance Bill 2011 this direction is ignored again, All Pakistan Tax Bar Association could file a petition in the Supreme Court under Article 185(2) of the Constitution for its implementation.
The following points merit consideration for effective and meaningful implementation of directions given in the NJP 2009:
1. Existing 4-tier appeal system under the tax laws-direct and indirect-consumes so much time for final settlement that the very purpose of seeking remedy becomes meaningless - justice delayed is justice denied aptly applies to the existing tax appellate system. The government has borrowed millions of dollars from the World Bank and other agencies for tax reforms, but no effort has so far been made to revamp the ailing tax appellate system for rapid disposal of tax disputes and reduction in unnecessary litigation.
2. The first appeal under the prevalent 4-tier appellate system lies before the Commissioner of Appeals/Collector Appeals working under the administrative control of Federal Board of Revenue (FBR). It is a travesty of justice. An aggrieved taxpayer is to seek relief from the departmental authorities! The FBR-appointed and controlled appellate authorities act as helping hands for their colleagues in service for collection of irrational and harsh demands to meet budgetary targets. They do give relief where issues are already decided by higher courts in favour of taxpayers but even for this "favour" taxpayers have to grease their palms. The Annual Confidential Reports (ACRs) - vital for further promotion in the service - of these "appellate" (sic) authorities are written by their bosses in FBR. Due to this constraint, they cannot impart justice even if they want to do so. The first-tier of appeal in view of this fact alone should be abolished immediately.
3. The second tier is Tax Appellate Tribunal (one dealing with Customs and second with all other indirect and direct taxes) are under the Federal Government [Ministry of Law] which is against the principle of "independence of judiciary" as highlighted in Para 5, page 12 of NJP 2009. Working as single, double or full (in special cases) benches, members are chosen from the legal fraternity or judicial services (Judicial Member) and the tax department (Accountant Member or Technical Member). Accountant/Technical Members work with heavy heart as majority is sent against their consent. They are the "dumped ones"-not liked by the Department hence condemned to go on deputation to Tribunals. They get double salary, courtesy FBR that is bent upon wasting billions of borrowed rupees on perks and perquisites rather than for any productive purposes. On the contrary salary of a Judicial Member is even lower than that of a civil judge. Tribunal is the final fact-finding authority and no further appeal lies to the High Court unless question of interpretation of law is required. Such an important forum dealing with federal statutes is financially dependent on Federal Government. The Customs Tribunal and Appellate Tribunal Inland Revenue should be merged into singular National Tax Appellate Tribunal. This should work under direct supervision of the Supreme Court like that of Services Tribunal. Appeals against its decisions should go straight to the Supreme Court.
4. After merging Appellate Tribunal, both Inland Revenue and Customs, the new entity should be renamed as National Tax Tribunal. Appeals against the Tribunal's orders should lie with the Supreme Court alone. Members for Tax Appellate Tribunal should be recruited in the same manner as judges of high courts.
5. The pay, perquisites and salary structure of Chairman, members and staff should be the same as that of a High Court Judge, Sessions Judge and staff of the lower judiciary respectively.
6. Tax codes are federal statutes but references against the orders of the Tribunal go to a High Court that work within the provinces. A person filing reference in Lahore High Court may get a different order on an identical issue filed in Sindh High Court. (To be continued)
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