Access To Justice Through Mediation in Tax Disputes: A Case Study of Pakistan
Access To Justice Through Mediation in Tax Disputes: A Case Study of Pakistan
Access To Justice Through Mediation in Tax Disputes: A Case Study of Pakistan
Introduction
ADR procedures have been initiated in Pakistan only recently for resolving
tax-associated disputes.Resolving such disputes is one of the primary
functions of revenue bodies. As tax disputes develops in regularity and
intricacy, revenue bodies encounter trials too meritoriously and efficiently
determine tax disputes under the restraints of limited resource. In order to
address these broader challenges, to meet the demands of the modern tax
administration environment and, to perform more efficient mediation
presents itself as a preferable strategy for resolving several common types
of tax disputes. When used in appropriate circumstances, mediation not
only delivers on its promise to provide quicker and less expensive dispute
resolution, but it does so in a manner that is more compatible with and that
advances the objectives of securing justice. Against this backdrop, this
research evaluates mediation as an alternative dispute resolution strategy to
complement the existing process for resolving Pakistan taxpayer’s disputes.
The case for tax mediation made in this research work follows Pakistan tax
legislative framework. And to facilitate such evaluation certain successful
tax mediation procedures from all over the world is considered.
ADR was introduced in fiscal statutes through the Finance Act, 2004.
Government extended such facility taking cognizance of the need of
alternative body for expedite settlement of disputes. This realization was
reportedly due to Federal Tax Ombudsman recommendation that initiated
the amendments in fiscal statues. Even though, with further introduction of
ordinance not much has been put forth on ADR mechanism. Sections 134-A
of the Income tax Ordinance was the first to develop this concept which acts
as para material to other fiscal statues such as the Customs Act, 1969, the
Sales Tax Act, 1990, and Federal Excise Act, 2005.
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introduced by the tax law that operates side by side with the existing
traditional mechanism. Through this alternative system the taxpayer can
refer their issue before an independent expert for recommendation for the
purpose of an out of court settlement with the benefit of a simple procedural
requirement free of any hardship.
Section 195C of Customs Act, 1969 and Chapter XVII of the Customs
Rules, 2001 Section 134A of the Income Tax Ordinance, 2001 and
Rule 231 C of the Income Tax Rules, 2002.
Section 47A of the Sales Tax Act, 1990 and Chapter X of the Sales
Tax Rules, 2004.
Section 38 of the Federal Excise Act, 2005 and Rule 53 of the
Federal Excise Rules, 2005
The gist of all these provisions provides that where a person is aggrieved of
any dispute in relation to tax liability or penalty or under any other
provision of the provided Ordinance, Act or Rules may apply before FBR
for the purpose of resolution through the means of ADR. Such application
may pertain to any matter that is pending before an Appellate Authority,
with the exception to prosecution proceedings or on question of law. It is to
be noted that during any stage an application to ADR could be made by an
aggrieved person and such may include; An individual, association,
company, and legal representative (in case of deceased). The general
process with respect to the application submission includes filing of an
application to the Chairman in the prescribed format which includes the
claim requested from the Chairman to direct. Such application is then
further examined to ascertain whether the application could be maintained,
upon the approval of the same, the Board forms the ADRC within the
prescribed time limit. This committee comprises of members nominated by
the Board with respect to the circumstances of each case. With respect to
the determination of the issue, the committee is empowered with certain
powers such as it may call for expert opinion or conduct an inquiry. The
committee then upon the determination of the issue makes their respective
recommendations, a conclusive report of the same is submitted to the FBR.
These recommendations are examined at FBR, which may agree or not
either in full or in part. And lastly, on agreement the Board may appropriate
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Implementation Overview
consideration the findings of the Honorable Sindh High Court on the order
passed by the Additional Collector Adjudication, which stated, “it militates
against the principles applicable to the tax matters, that the issues once
settled and accepted by the Department shall not be allowed to be deviated,
because it will create uncertainty which has always been deprecated and
disapproved by the Superior Courts, Legislature, as well as the Board
itself.” Similarly, reverting to the judgment of the Superior Court in the
case of Mehran Motor Car Co. v. Collector of Customs,11 wherein it was
held that, "If after the enforcement of demand on account of short levy, the
Authority, through separate proceedings, again called upon the importer to
pay the short levied amount, then the same would be a case of double
jeopardy." Thus, this entails that the decision of the committee does have a
binding effect indirectly without taking into consideration the proposed
amendment. It is to be understood that even where the parties may not be
able to reach an agreed resolution the ADR process can help to improve the
efficiency of any subsequent litigation e.g., by clarifying/agreeing the facts
and narrowing the dispute to the key issues needed to be tested at Tribunal
or other authority.
regards to tax, the ultimate beneficiary will always remain the citizens,
making as a whole a state.
The board concluding this further stated that the case would finally be
resolved after the implementation of the following rules and that the FBR
will avail heavy revenue. The only aim for FBR being as could easily be
inferred is generating revenue. On November 2018, The FBR announced
that it had decided to grant the facility to resolve more than 31,000 tax
cases at different legal forums through mediation committees. But has this
Board defined the process of medication committee. The answer to this is
no.
will then give its recommendations to the committee to solve the issue. It
was further stated that the decision of the majority of the committee will be
considered the committee’s decision.
The taxpayer can initiate ADR against the assessment by indicating “refer
to ADR”. Within 20 business days SARS determines whether the matter is
appropriate for ADR. For this purpose the Commissioner is the designated
authority to give opinion that a matter is appropriate for ADR, within 10
days he must inform the taxpayer of the receipt of the notice of appeal. The
taxpayer is further required to notify in writing within 10 days to the
Commissioner whether he approves to ADR. In case the taxpayer approves
to the process, a facilitator will be appointed by the SARS who endeavor to
settle the dispute between the concerned parties. The facilitator is not
allowed to compel the parties or make a ruling which binds the parties
involved. He is required to arrange for an informal sessions wherein parties
present their respective case through providing evidence. The facilitator is
obliged to follow a code of conduct by employing equitable and fair means.
Between 2010 and 2013, HMRC piloted mediation as strategies for both
complex cases and small sized businesses for resolving tax disputes. HMRC
on the basis of pilot projects evaluated certain aspects concerning tax
mediation. It observed mediation as a cost-effective strategy for a successful
resolution tax disputes providing for a measurable time (8 and 23 months to
61 days) particular concerning individuals. HMRC noted that “qualitatively,
HMRC are confident that they have made significant savings in both cost
and time in resolving disputes through the alternative dispute resolution
process for both HMRC and the customer.” It further observed that even in
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the court. Same programme was appreciated in Singapore where 95% (3746
of 3943 cases) were resolved.
Mediation in Netherland with reference to tax disputes can be requested by
both the Tax Authorities and the Judiciary. The Dutch Tax Authorities
website indicates certain cases in which mediation could be followed as not
all disputes are qualified to mediate, it also provides for an exhaustive
information concerning mediation.
The mediation process follows the traditional procedure. The first meeting
is proceeded with a comprehensive clarification of rules and obligations of
all concerned parties. The MFN rules states the duty of confidentiality and
impartiality of mediator to act in expeditiously manner. The Dutch Tax
Mediation Association (VFM) was founded in the Netherlands in 2007. The
objective of this VFM is to promote the awareness and applicability of
mediation in tax disputes. The VFM website provides for a list of the VFM
members in case parties concerning tax dispute requires a tax expert as a
mediator.
Conclusion
The concept of mediation is relatively new in the Pakistani court rooms, and
certain amendments are being made in the existing laws to make the system
of mediation more common so that the burden on court rooms can be
lessened. The success rate of mediation is currently satisfactory however,
there is still room for improvement and for the very same purpose, and
certain recommendations have been made that extremely essential in order
to serve the very purpose behind mediation i.e. easier and quicker access to
justice and the limitation of burden on court rooms.
In recent years mediation exclusively considered has been gaining quite a
success in Pakistan, however the tax field strives pertinaciously to be dealt
with the same. A relic of this attitude is to be found in Article 1 of the
European Union Directive on Mediation. This article aims at encouraging
the use of mediation in cross-border disputes in commercial disputes and
civil disputes. However, Article 1 excludes from the scope of the Directive
disputes about revenue, customs and administrative matters.ADR
committee has been introduced by the Board to cater tax disputes through
quick settlement. The working of ADRC though provides for an alternative
mechanism however it is not rich in providing for a mediated dispute on the
mutual benefit of the concerning parties. Growing dispute between tax
authorities and citizen have started to create a hurdle in the economic
growth of the country due to the deprecation of revenue on both sides. This
Access to Justice through Mediation in Tax Disputes: A Case Study of Pakistan 43
study focuses that taxation is deemed as public law which requires for
uniform and fair approach. Such approach enunciates on the basis of the
principle of fairness and thus should be regarded in the practice of justified
departure of issue, which could only be achieved through tax mediation.
The lack of precedents in taxation field is one of the significant reasons for
causing uncertainty about what mediation would involve or entail. However
it does not mean that such process should not be incorporated. Beyond the
specific criticism and analysis, this study has sought to demonstrate the
need for a more wide-ranging mediation mechanism concerning tax
disputes in Pakistan. It further highlights the need for further research to
evaluate the institutional capacity of system to support international
practices concerning mediation. This in less intrusive manner has been
provided in this paper which focuses on other tax detain models of the
world to seek for the practice that could facilitate this process of mediation,
particularly to tax dispute, in Pakistan.
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15
"The Rise Of Commercial Mediation In Australia - Reflections And The
Challenges Ahead". 2017. Journal Of Mediation &Amp; Applied Conflict
Analysis 3 (2): 439-462. doi:10.33232/jmaca.3.2.7919.