EDITORIAL: That the total disputed tax amount stuck in litigation has increased by 38 percent to Rs1.8 trillion over the last two years ought to give the government something to think about. Yet it doesn’t speak much of its sense of priorities that it still allocates only a paltry sum of Rs2687 per case in terms of fees to the legal counsel to contest these cases on its behalf. Even after a lot of hue and cry it has increased, albeit marginally, the amount it sets aside for them, which apparently is still not enough to attract highly competent lawyers. It is for this reason of financial stringency, perhaps, that the composition of appellate tribunal benches remains incomplete to this day. Tax authorities contend that most taxpayers do not have such constraints, so it’s only natural that they are able to attract a much finer breed of advocates.
News reports regularly speak of the Pakistan Tehreek e Insaf (PTI) government taking this problem very seriously, but so far such intentions have not been reflected in its actions or its policies and the recovery rate has now begun to deteriorate at an alarming rate. There are 150 percent more such cases stuck in courts now than two years ago; and 285 percent more pending with the appellate tribunal alone. This is a very dangerous trend and unless the government acts very quickly to arrest it things will spiral completely out of control sooner rather than later.
That is why before proceeding any further it is important to figure out the original demand for tax without the penalty. The law imposes upto a 100 percent penalty on any given quantum of tax demanded. Secondly, there is also often an element of trumped up demand which is added to show improved performance or to help meet targets. And, of course, once the matter goes to the court the government finds itself on the losing side. Courts have a very long waiting list, because relief is granted by way of stay orders then after a considerable delay the case is heard on its merit with the pendency queue and the verdict delivered. It is, therefore, advisable that the government consider the opportunity cost of the entire exercise and work to arrive at a settlement with the taxpayers.
If authorities are willing to forego the amount of the penalty, in the interest of receiving the original amount, the number of such cases stuck in litigation would progressively decrease instead of increasing. As things stand, the Federal Board of Revenue (FBR) and ministry of finance regularly crib, and rightly so, about the huge amounts of tax recovery stuck in courts without giving much thought to devise ways to remedy the situation except for an occasional plea by the executive to the chief justice to expedite the disposal of cases pending in courts. It would be useful if the government would conduct a study of the held up revenue the government has been able to realize after decades of litigation. This would bring to the fore the trumped up demand made by the tax authorities that could not withstand scrutiny in the appellate fora. The courts simply work in keeping with the law and according to the merits of each case. So instead of wasting time and making noise that the government knows very well is not going to get anything done, it must approach the matter in a very methodical manner and see where it can save time and improve recoveries. Already, tax amount stuck in litigation has reached approximately 44 percent of last year’s total revenue collection, which ought to be unacceptable for a government so obsessed with improving the health of national reserves.
This is one of those things which begin as minor irritants but, if left unchecked for long, become mega problems that take a long time to be solved. Yet even that long journey must first begin somewhere. Therefore, the government must first set more money aside for this purpose and at least make sure that the Federal Board of Revenue (FBR) is able to hire lawyers capable of making a positive difference. And it must then work out a mechanism to approach taxpayers directly and solve as many cases as possible without needlessly dragging them through the judicial process for unjustifiably long time periods. That would not just help overcome a very sensitive problem but also make the government’s tax machinery much more efficient, which can and will prove beneficial in more ways than one.
Copyright Business Recorder, 2021
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