The federal government is moving toward significant reforms in Pakistan’s tax dispute system as the number of pending cases involving the Federal Board of Revenue continues to rise sharply. Authorities are now considering the formation of a scrutiny committee to examine tax appeals before they are filed in courts, with the goal of discouraging unnecessary litigation and improving the efficiency of the legal system.
The proposed reform is expected to be included in the Finance Bill 2026–27 and comes after a task force submitted a detailed review of pending tax disputes to Prime Minister Shehbaz Sharif and the federal cabinet.
Rising Number of Pending Tax Cases
Pakistan’s tax litigation problem has reached an alarming level. According to the task force report, more than 85,000 tax-related cases are currently pending before different judicial forums, including the Supreme Court, high courts, and appellate tribunals.
The report revealed that:
- Over 1,300 cases are awaiting decisions in the Supreme Court
- More than 17,000 cases are pending in high courts
- Nearly 67,000 disputes remain unresolved at tribunal level
The majority of these cases involve Inland Revenue matters, while thousands are also linked to customs disputes.
Huge Amounts of Revenue Remain Blocked
One of the biggest concerns highlighted in the report is the amount of government revenue tied up in litigation.
Authorities estimate that approximately ₨278 billion in customs revenue remains stuck in unresolved legal disputes. At the same time, officials were unable to determine the exact financial exposure in Inland Revenue cases because of inconsistencies between court records and FBR’s internal databases.
This lack of reliable data has exposed serious weaknesses in the management of tax litigation and recordkeeping systems.
Why the Government Wants a Scrutiny Mechanism
The proposed scrutiny committee is intended to review appeals before the FBR takes cases to higher courts. The aim is to stop repetitive or weak cases from adding further pressure to the already overloaded judicial system.
The task force found that many appeals were being filed even after legal issues had already been settled by superior courts. This practice not only increases legal costs but also wastes administrative resources and delays resolution of genuine disputes.
By introducing a review mechanism, the government hopes to ensure that only legally justified and important cases proceed through the courts.
Structural Weaknesses Inside the FBR
The report identified several operational and governance problems within the FBR’s legal structure.
Among the key issues highlighted were:
- lack of coordination between departments,
- conflicting legal positions presented in courts,
- absence of accountability for filing weak appeals,
- and no proper system to evaluate legal performance based on case outcomes.
The task force also observed that the Inland Revenue and Customs legal divisions operate separately, leading to duplication and inefficiency.
Technology Systems Working in Isolation
Another major issue is the lack of integration between FBR’s digital systems.
Platforms such as IRIS, WeBoC, and the Legal Management System reportedly operate independently without proper connectivity. As a result, officials often struggle to maintain accurate records and monitor ongoing litigation effectively.
The report also pointed out that appellate tribunals still lack modern digital case management systems, contributing to delays and administrative inefficiencies.
Backlog Could Take Years to Clear
The growing number of pending cases has created serious concerns about the future of Pakistan’s tax dispute system.
According to estimates in the report, tribunals currently resolve around 10,000 cases each year. At that pace, it could take nearly six years to clear the existing Inland Revenue backlog alone — without considering new cases filed during that period.
This highlights the urgent need for institutional reforms and faster dispute resolution mechanisms.
Alternative Dispute Resolution Still Underused
The task force also emphasized that Alternative Dispute Resolution (ADR) mechanisms remain largely ineffective despite their potential to provide quicker and less expensive settlements.
Although ADR frameworks exist under tax laws, they have not been fully utilized because of limited implementation and weak institutional support.
Experts believe stronger use of mediation and negotiated settlements could significantly reduce the burden on courts while improving relations between taxpayers and revenue authorities.
Government Plans Institutional Changes
To support these reforms, the FBR has reportedly proposed the creation of a new position called “Member Legal Reforms.” The official would oversee legal restructuring, litigation management improvements, and implementation of reform measures.
The government’s broader objective is to create a more transparent, efficient, and business-friendly tax environment while strengthening revenue collection and reducing unnecessary legal battles.
If these reforms are implemented effectively, they could improve confidence in Pakistan’s tax administration system and help resolve one of the country’s most persistent governance challenges.