Rebuilding tax justice—I Time for National Tax C...

Summary

• On October 28, 2009, after the reorganisation of income tax, sales tax and federal excise administration into Inland Revenue, it was renamed the Appellate Tribunal Inland Revenue (ATIR).
• Through the Finance Act, 1989, section 194 was substituted and the Federal Government was empowered to constitute the Customs, Excise and Sales Tax Appellate Tribunal with judicial and technical members.
• The proposed court would have exercised appellate jurisdiction over, among other federal laws, the Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001.

AI Generated Summary

Tax reform in Pakistan almost always begins with rates, exemptions, documentation, enforcement (now faceless as well!) and revenue targets. It rarely begins where the credibility of every tax system is ultimately tested: what happens when the State and taxpayer disagree? A lawful tax is a compulsory exaction. Precisely because payment is compulsory, an independent, competent and expeditious forum for challenging the State is not a concession to taxpayers. It is part of the legitimacy of taxation itself.

Pakistan once understood this principle better than it does today. Income tax was introduced in British India in 1860, but for decades there was no genuine separation between collection and appellate adjudication. Tax officers operated within the same administrative hierarchy; the Commissioner responsible for revenue administration also exercised appellate authority.

Public dissatisfaction eventually produced an institutional break. The Income-tax (Amendment) Act, 1939 separated important administrative and judicial functions and, on January 25, 1941, the Income Tax Appellate Tribunal was constituted under section 5A of the Income-tax Act, 1922.¹

The object was remarkable for its time. An aggrieved taxpayer could obtain redress from a body outside the ordinary tax-collection hierarchy, combining legal and accounting expertise. The Tribunal was meant to be inexpensive, accessible, relatively free from technicalities and capable of quick disposal by members possessing specialised knowledge.

Pakistan inherited it at independence. On October 28, 2009, after the reorganisation of income tax, sales tax and federal excise administration into Inland Revenue, it was renamed the Appellate Tribunal Inland Revenue (ATIR). Its essential character remained that of the final fact-finding forum in federal inland-revenue disputes.²

Customs followed a different route. The Customs Act, 1969 did not originally create the present appellate tribunal. Through the Finance Act, 1989, section 194 was substituted and the Federal Government was empowered to constitute the Customs, Excise and Sales Tax Appellate Tribunal with judicial and technical members.

Later statutory changes produced the present Customs Appellate Tribunal. Thus, Pakistan came to possess two specialised federal appellate institutions: ATIR for inland revenue and a separate tribunal for customs.³

Their rationale remains sound. Their present architecture does not. ATIR decides disputes involving income tax, sales tax and federal excise, including corporate taxation, banking, international transactions, transfer pricing, withholding, anti-avoidance provisions and accounting questions.

The Customs Appellate Tribunal determines classification, valuation, origin, confiscation, penalties and other issues directly affecting international trade. These are not minor administrative offices. Their decisions determine private rights, public revenue and the interpretation of federal fiscal statutes.

The scale of the present problem is revealing. Our April 2026 analysis, based on figures then supplied to the Prime Minister, recorded over Rs. 3.3 trillion in disputes before ATIR and more than 21,000 active cases. By July 2026, official estimates reported in the press put total pendency before tax tribunals at about 68,000 cases—around 60,000 inland-revenue matters and 8,000 customs disputes. Different reporting dates and methods explain part of the variation, but not the conclusion: congestion remains severe.⁴

The government tried to answer the problem by paying more. Under the ATIR Appointment Rules, 2024, private-sector members became entitled to pay, allowances and privileges admissible to High Court judges; the Chairperson to those of a Chief Justice of a High Court.

Members drawn from specified government categories retain their pay and receive an additional monthly tribunal allowance of Rs. 700,000. Twenty-four private-sector members were later reported to be drawing around Rs. 2.6 million each per month.⁵