Tax reform efforts face infrastructure hurdles: PTBA

KARACHI: The new tax act, approved by the president on May 3, has come into effect immediately, but concerns remain over the lack of infrastructure to support its implementation, the Pakistan Tax Bar Association (PTBA) said.

"We understand that the wisdom behind the Act is to melt down the tax revenue stuck at the Appellate levels. However, the entire document has been drafted and approved on the pretext that the infrastructure, in terms of Section 130(2) of the Income Tax Ordinance, 2001, which clearly stipulates that the members of the Tribunal shall be appointed in such numbers and in such manner as the Prime Minister may prescribe by the rules," PTBA said in a letter to the law and justice minister, Azam Nazeer Tarar.

"We are afraid that until the time this ACT has been assented to by the President of Pakistan, rules in terms of Section 237 of the ordinance, or the Federal Public Service Commission Ordinance, 1977, have not been issued. Therefore, the foundation of the entire desired appellate structure under the ACT does not exist, and the fundamental rights of the taxpayer are being infringed."

PTBA said until the time that the entire infrastructure, the capacity, and the appointment process of the members of the Tribunal are not fully completed through a transparent and independent process, the existing mechanism should be allowed to remain in force.

"A due diligence exercise may be conducted within the FBR to identify the cases which are pending in appellate forums and courts and have attained finality in terms of decisions from the Apex Courts," the letter said. "Such cases may immediately be withdrawn, which will, in our opinion, minimize by at least 50 percent of the case burden on the appellate forums and courts, and then the Government will be able to actually evaluate the revenue stuck at the appellate levels."

It said an oversight or review committee may be formed to evaluate the standard of assessment made by the assessing officer at the original assessment level in order to evaluate the genuineness, quality, and standard of assessment and demand created through that order.

The committee should also analyze whether any issue which has been settled and attained finality, the FBR may be directed to restrain its officers from passing an order in contrast to the appellate decision, under the garb of the acronym of “every year being a different tax year.”

"This entire exercise, after a lapse of years, ends up in a futile exercise because courts never deviate from the decisions which have already attained finality."PTBA recommended that the mandatory payment of 30 percent that is required at the time of filing of reference before the High Court may restrict the taxpayers from their fundamental right of appeal.