Tax justice system at bay

Huzaima Bukhari & Dr. Ikramul Haq "It is to be noted that appeals should not be filed as a matter of routine or because a decision has been rendered against the Department. Decisions should be taken on a reasonable basis. It is not advisable for government departments to waste public time and money by filing appeals routinely"- Pakistan through Chairman of FBR & Others v Hazrat Hussain and Others�118 TAX 260 (Supreme Court) The efficient resolution of tax disputes is critical to strengthening public confidence, improving governance standards, and fostering a predictable legal environment-Chief Justice of Pakistan, Yahya Afridi, Business Recorder, April 17, 2026 "Law and good practice also requires that judgments be written soon after the hearing has concluded?.The judgment took over six months to write, or precisely 223 days. His lordship sent the judgment to me on 18 July 2024 and the very next day on 19 July 2024 I wrote my note thereon and signed it. Order XX, rule 1(2) of the Code of Civil Procedure, 1908 ('the Code') prescribes that judgments should be written within thirty days"-Shahtaj Sugar Mills Limited v Government of Pakistan (2024) 130 TAX 528 (Supreme Court) The above judicial observations and statement of Chief Justice of Pakistan Mr. Justice Yahya Afridi , read together, present a troubling portrait of Pakistan's tax justice system. One judgement exposes the persistence of revenue authorities in pursuing litigation devoid of merit and the other points to delay within the judiciary itself. Between the two lies observation of CJP regarding a systemic failure where adjudication is slow and disputes are needlessly prolonged. The main malady of tax justice system is not confined to inefficiency alone. It reflects a deeper structural imbalance where litigation has become embedded in the very functioning of tax administration, both at federal and provincial levels. Public discourse on judicial reform continues to revolve around broad abstractions-pendency, vacancies, backlog-without isolating the specific subsystems that generate disproportionate pressure. Among these, the tax appellate framework stands out for both its volume and its economic consequences. It is here that the tension between state revenue interests and constitutional guarantees of due process becomes most acute, and it is here that institutional design has failed most visibly. The scale of pending tax litigation is now officially acknowledged at the highest levels of government, even as concern is expressed over the performance of revenue authorities. More than Rs 5.4 trillion remains locked in disputes across various appellate forums. This figure is not merely indicative of administrative difficulty; it represents immobilised fiscal resources and deferred economic activity. A substantial portion-over Rs 3.3 trillion-remains pending at the Appellate Tribunal Inland Revenue, while the superior judiciary is burdened with thousands of cases involving nearly Rs 2 trillion. The Supreme Court itself is seized of several thousand tax matters, while High Courts, particularly the Lahore High Court, carry a disproportionate share of this burden. These figures are frequently cited to highlight enforcement challenges, yet they also reveal an inconvenient truth: the state, through its revenue machinery, is the most persistent litigant and, in many instances, the principal originator of avoidable disputes. The pattern is by now well established. Assessments are framed with limited regard for settled legal principles, often influenced by revenue targets that prioritise additions over sustainability. When challenged, many of these assessments fail at appellate stages. Yet instead of recalibrating administrative conduct, the system perpetuates itself through successive appeals, even on issues already settled by higher courts. Litigation thus becomes self-generating, feeding on its own outcomes. The consequences extend well beyond the courtroom. For taxpayers, prolonged uncertainty translates into economic cost. Investment decisions are delayed, capital remains locked and compliance becomes conditional rather than automatic. For the state, projected revenues remain unrealised, contributing to fiscal imbalances and compelling reliance on indirect taxation. In this sense, the failure of tax justice delivery is not merely a legal deficiency; it is an economic constraint. The appellate structure through which tax disputes travel further compounds the problem. Matters originate before tax authorities, proceed either to the Commissioner (Appeals) or directly to the Appellate Tribunal Inland Revenue at the option of a taxpayer, and then ascend to the High Courts and ultimately the Supreme Court. Each stage introduces delay and interpretive divergence. The absence of a unified forum leads to fragmented jurisprudence, where similar issues yield differing outcomes, thereby encouraging further appeals involving huge cost and time. What is presented as a system of layered safeguards operates, in practice, as a sequence of procedural impediments. The persistence of such a structure raises a fundamental question as to whether incremental procedural adjustments can remedy what is essentially a design flaw. Experience suggests otherwise. What is required is not refinement but reconstruction. A coherent response would necessitate consolidation of all judicial and quasi-judicial functions relating to tax adjudication both at federal and provincial into a single specialised forum-a National Tax Tribunal-operating under the supervisory jurisdiction of the Supreme Court, on the model of the Federal Service Tribunal. Such an arrangement would restore coherence to tax jurisprudence and introduce predictability currently lacking. Appeals from this forum, limited to substantial questions of law, could lie directly to the Supreme Court, while constitutional challenges may be addressed within the framework of the Federal Constitutional Court. The value of such consolidation lies not merely in efficiency but in discipline. A specialised tribunal, combining judicial and technical expertise, is more likely to produce consistent decisions, thereby reducing incentives for speculative litigation. Equally important is the behavioural shift it may induce within the tax administration itself. When adjudication is credible and predictable, administrative conduct adjusts accordingly. The near-collapse of alternative dispute resolution (ADR) mechanisms reflects a parallel institutional failure. Despite statutory recognition, ADR remains peripheral, often invoked as a procedural formality rather than a genuine mechanism for settlement. This is not due to any inherent weakness in the concept but stems from a system that continues to privilege adversarial contest over negotiated resolution. Technological transformation offers a further avenue for reform, though one that remains underutilised. The global experience demonstrates that digital platforms, virtual hearings and integrated case management systems can significantly reduce delay and enhance transparency. Pakistan's superior judiciary has taken tentative steps in this direction, yet tax adjudication remains largely untouched by such innovation. The continued reliance on paper-based processes at the tribunal level, where the bulk of litigation resides, reflects a disconnect between need and reform. Comparative experience also underscores the importance of early engagement. Jurisdictions that have successfully reduced tax litigation emphasise pre-litigation resolution, mediation and administrative review. Once disputes enter formal adjudication, positions tend to harden and resolution becomes more difficult. Pakistan's system, by contrast, often allows disputes to escalate without meaningful intervention at earlier stages. Beyond institutional and technological considerations lies a dimension that is rarely acknowledged in policy discourse: the ethical foundation of tax administration. A system premised on coercion and extraction inevitably invites resistance. The alternative lies in a framework grounded in fairness, proportionality and accountability, where the state exercises its authority with restraint and the taxpayer responds with voluntary compliance. The principle that justice must be upheld even when it operates against one's own interest is not merely moral exhortation; it is a practical mechanism for reducing conflict. Where administrative action is perceived as fair, the incentive to litigate diminishes. The constitutional implications of the present state of affairs are equally significant. Guarantees of due process and equality before law are not fulfilled merely by the existence of appellate forums; they require that such forums function effectively. Prolonged delays and inconsistent outcomes undermine these guarantees in substance, even if they remain intact in form. Fiscal federalism, too, is affected when substantial revenues remain entangled in unresolved disputes. It is, therefore, misleading to treat tax litigation as a narrow sectoral issue. It represents a convergence of administrative practice, judicial capacity and economic policy. Any meaningful reform must recognise this interdependence. The persistence of over Rs 5.4 trillion in pending litigation is not a problem that can be addressed through periodic expressions of concern. It is the product of a system that has internalised delay and normalised inefficiency. Reversing this trajectory requires structural change, recalibration of administrative incentives and a renewed commitment to fairness. The observations of the Supreme Court in Bank of Punjab and Shahtaj Sugar Mills should be read as both warning and opportunity. They highlight systemic failure but also point towards the possibility of correction. Whether that opportunity is seized will determine not only the future of tax justice but also the credibility of the state's commitment to lawful governance. Justice, particularly in fiscal matters, derives its legitimacy from timeliness and fairness. Where either is absent, the system loses its authority. Pakistan's challenge is not merely to dispose of cases, but to create conditions in which fewer disputes arise and those that do are resolved with clarity and finality. Until then, tax justice will remain, quite literally, at bay. ___________________________________________________________________ Huzaima Bukhari, lawyer and author, is an Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE) Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.