Rs1.856tr revenue stuck in litigation, FBR chief tells PAC

The Federal Board of Revenue (FBR) disclosed that more than Rs1.856 trillion revenue has been stuck for years due to litigation in various courts, resulting in difficult financial conditions for the country. "The appellant tribunals have been non-functional for two years," said FBR Chairman Mohammad Javed Ghani while testifying before the Public Accounts Committee of parliament, adding that defaulters also go into litigation in superior courts and get stay orders.

The amount of stuck revenue is huge - almost half of the total revenue of Rs3.9 trillion collected in the country last year. "If this amount is recovered, the country's financial system could be streamlined to a great extent," said PAC member Khawaja Mohammad Asif.

Mr Asif had sought details of the stuck amount of the FBR due to courts' stay orders. According to statistics submitted before the PAC by the FBR authorities, cases related to recoveries of Rs117 billion are pending in the Supreme Court, Rs136bn in the Islamabad High Court (IHC), Rs228bn in the Lahore High Court (LHC), Rs134bn in the Sindh High Court (SHC), Rs169bn in the Peshawar High Court (PHC), Rs602 million in the Balochistan High Court (BHC).

Litigation related to remaining amount is stuck with the tribunals and their appellate forums of the FBR and majority of them are non-functional due to absence of members and presiding officers.

Mr Asif recalled that a couple of months back, the law ministry gave an undertaking to fill up vacant positions in these tribunals. Upon his inquiry, the official of the Ministry of Law and Justice informed the committee that the summary regarding appointment of members and presiding officers for the tribunals have been forwarded to the prime minister.

He expressed the hope that the appointments would be notified after getting approval from the competent authority.

PAC member Sardar Ayaz Sadiq suggested that the PAC take up this matter with the provincial high courts as well as with the Supreme Court. He also suggested that the attorney general be invited to an exclusive session on this particular issue.

The attorney general may move applications for early hearing of FBR-related cases. Mr Asif pointed out that one of the weaknesses of the FBR was its weak legal team. He said defaulters usually engaged well-known and expensive lawyers whereas the FBR could not compete with them in terms of paying legal fee. Subsequently, lawyers of private firms can easily obtain a stay order against the payment of taxes involving billions of rupees.

According to Mr Sadiq, a stay order could only be valid for six months; however, restraining orders against recoveries involving billions of rupees remain intact even after 5-7 years. Hina Rabbani Khar recalled that the PAC had been planning to take up this matter with the Chief Justice of Pakistan for the last 12 years, but to no avail.

FBR chairman Ghani informed the committee that in the finance bill for the current fiscal year, the FBR introduced the Alternative Dispute Resolution (ADR) to settle the tax-related dispute out of court.

He said that the parties in litigation could resort to ADR to resolve the dispute and they had the liberty to settle this through court. Mr Ghani expressed hope that the ADR would reduce burden from courts and expedite the tax recovery.