Tax Reform Commission advises autonomy for appellate forums

ISLAMABAD: The Tax Reform Commission (TRC) has proposed to the government that the appellate forums related to tax matters should be made independent from the formal influence of the Federal Board of Revenue (FBR).
In its report, a copy of which is available with The News, the TRC states that the current tax judicial system has failed to meet the minimal requirements of a neutral system for dispensation of justice that should enjoy trust and confidence of the taxpayers, thus require a complete overhaul.
“The tax adjudication system must rest on fundamentals of independence, insulation and isolation from tax collection. The prosecution has to be separated from adjudication with gradual shift towards independence by transferring the adjudication system under the command and control of independent office or Ministry of Law or most preferable under the respective High Courts,” the report said.
“In transitional phase, transfer of tax officials to adjudication system should be based on option exercised by the tax officials and there should be a bar on repatriation to the administrative function. In the long-term, there should be a separate process in place for appointments and career management in tax adjudication system.”
The report said in view of that it is considered that the Appellate Tribunal should be considered as the first level of appeal and then as a remedy tax courts/special benches should be established within High Court. An appeal against the decision of Tax court should be before the Supreme Court. The report said the existing system suffers from manifold maladies.
“At the first level of adjudication / assessment, the disputed matters are adjudicated by the departmental officials. Most of these cases are initiated by the same officials or their colleagues working in the tax collecting organisation. It is unfair to expect them to dispense justice in such matters as neutral adjudicators,” it added. The TRC report said the tax officials, with a few noble exceptions, generally have an inherent revenue bias. The officials are assigned tax collection targets whose achievement or failure to do so determine the basis of their annual performance evaluation, it said. “How can they be expected to withdraw a tax demand no matter how unlawful it be?” The tax officials do not receive any formal meaningful training in judicial or quasi-judicial processes and their prerequisites nor are they familiar with the principles of statutory interpretation and a voluminous stock of case laws that they should be familiar with in order to do justice to their role as a judge, the report said.
“The second tier of adjudication namely commissioner of appeals are also drawn from the FBR officers who report directly to the FBR. They too tend to follow the approach of junior colleagues whose decisions they have to review as an appellate authority.
As their postings as appellate authority is not for a fixed period they may not feel and posture independence in their actions,” it added.
“In the absence of any internal accountability the first and second tier of adjudication are least concerned even if an overwhelming percentage of cases decided by them are thrown out by the superior courts.”
The report said the final tier of tax adjudication proceedings is the Appellate Tribunals working under the Ministry of Law & Justice.
“The tribunals are called to be independent of tax collecting hierarchy and traditionally they have been dispensing justice to some degree though their performance has perhaps not been objectively reviewed / analysed over the years to determine their efficacy.”
The report said in view of the fact that it is difficult to attain justice from the first two tiers of adjudicators, most cases end up at the Appellate Tribunals and their existing capacity has been overlooked. “Pendency of certain appeal matters over several years is a matter of common knowledge.”