In a significant legal development, the Lahore High Court (LHC) has expressed strong discontent over the Federal Board of Revenue’s (FBR) exemption from paying court fees for filing tax references, a privilege not extended to ordinary citizens. This issue came to light after it was revealed that while the FBR is exempt from the court fee requirement, the average citizen is required to pay a hefty sum of Rs. 50,000 per reference. The court has called this exemption discriminatory and contrary to the principles of fairness and justice.
The controversy arose when the LHC’s Rawalpindi bench ruled on a case involving the 2024 Tax Laws Amendment Act, which sought to remove the position of Commissioner Inland Revenue (Appeals). In its ruling, the court raised concerns over how this amendment has the potential to severely disrupt the judicial process. The LHC highlighted that this amendment creates unnecessary delays and bottlenecks in the court system, hampering the effective flow of justice.
Under the existing tax laws, there is a three-step appeal process. The first step involves an appeal to the Commissioner (Appeals), followed by an appeal to the Appellate Tribunal, and finally, a Tax Reference under Section 133 to the High Court. However, the new amendment proposes the removal of the first step, effectively bypassing the Commissioner’s appeal process and placing a heavier burden on the courts.
In its findings, the court expressed frustration at the Ministry of Law and Justice’s stance on the matter. The Ministry argued that the changes were necessary to streamline the tax dispute process. They claimed that a backlog of approximately Rs. 2 trillion in tax revenue was stuck in cases before the Appellate Tribunal. This backlog is reportedly due to factors such as insufficient benches, poorly formed benches, and slow case processing. The Ministry contended that eliminating one appeal step would simplify and expedite the process, reduce paperwork, and save costs.
Despite these arguments, the LHC found the Ministry’s reasoning insufficient. The court pointed out that FBR, as the governing body of tax laws in Pakistan, is responsible for the collection of taxes and the implementation of tax policies. However, the recent amendment places a disproportionate amount of responsibility on the courts, which are already overburdened. The LHC noted that there are currently very few tax benches available to handle the growing number of cases. In fact, there is only one tax bench in Bahawalpur, one in Multan, two in Rawalpindi, and just three at the main court in Lahore.
In response to these concerns, the court has summoned the FBR’s Director General to explain why the organization is exempt from paying court fees, while ordinary citizens are subjected to a heavy financial burden. The LHC’s decision reflects its ongoing efforts to ensure fairness in the legal system, particularly in the realm of tax laws, which affect millions of Pakistani citizens.
This legal development underscores the importance of transparency and equal treatment in the judicial process, as the court continues to scrutinize policies that impact the public. The case also highlights the broader issue of judicial delays and inefficiencies in Pakistan’s tax system, and the need for reforms to ensure that the tax dispute resolution process is both equitable and efficient.