According to press reports, in May-2008 an understanding has been reached between the Income Tax Bar Association and the FBR for strengthening the ADR system. Insertion of an enabling provisions in the Income Tax, Customs, Sales Tax and Excise Duty Laws in 2003 for resolution of fiscal laws disputes through the ADR mechanism has been a very welcome move to the advantage of both tax payers and government, but disastrous to the officials otherwise.
The mechanism calls for Government notifying a panel, comprising lawyers, professional accountants and retired bureaucrats. Drawn from the panel are two of the three persons in a committee set up to hear an ADR reference assigned to it by the FBR. The third member is a Collector/Commissioner of Tax. Chairman of the Committee is one of the two aforesaid persons from the approved FBR panel. Lot many essential details with regard to working of ADRCs and obligations of ADRC Secretariats are missing in all the aforesaid laws.
In pursuits to strengthen ADR system what is not being given emphasis is:
(a). Weight FBR assigns to the ADRCs' recommendations to which a Tax Commissioner/Collector is a party.
ADRCs' recommendations are disregarded by the FBR as a matter of routine. What should happen is that no officer below a Member should be authorised to toy with an ADRC finding. Dissention with an ADRC recommendation should emanate only under the hand of an FBR member. Decision for rejection of ADRCs' recommendations should be taken in a formal meeting of FBR attended by the Chairman and FBR members.
FBR should make the Commissioner of Tax accountable for the ADRC decision. It should at the same time take him into confidence by way of detailed justification in writing when an ADRC recommendation is turned down. (b). There should be qualifications criteria of the FBR's panellists. At present there seems to be none.
Panellists are often nominated on the recommendation of chambers/trade bodies etc, many of whom are not fairly educated/do not have exposure to comprehend issues raised in a request to FBR for constitution of an ADRC. At times the ADRC members are former FBR officials whose understanding of complex issues is confined to 'disposal' of files on the basis of 'scant' knowledge of tax laws acquired through reading of FBR files and circulars during the service tenure.
These former FBR officials have the obsession that nobody understands the tax laws better than they do. Because for 30-40 years they have been toying with the ideas of their bosses or their subordinates delivered home.
In general, exceptions apart, the former FBR officials neither have the needed clues nor the will nor the stamina to fathom the turbulent waters of disputes before them. They are not cognisant that it is the mess created by them the present generation of FBR officials is charged with the task of cleaning.
To cater good governance and interests of all concerned, more of the FBR, the Board may get into the proposition of restricting its ADR panellists to lawyers enrolled with a High Court and members of ICAP and ICMAP.
While making nominations from the business class, if at all any, in particular industry politicians eg businessmen of the sort of former presidents of chambers, trade bodies, trade associations may be kept out of the ADRCs. FBR files would testify that it is these sort of ADR panellists who have an inherent tendency to toy with the laws and who have been playing havoc with working of the tax system.