Pakistan’s tax debate is obsessed with collection. Every budget brings a new target, new withholding devices, new enforcement powers, new technology and fresh assurances that documentation will finally widen the tax base. Much less attention is paid to the institution that decides whether the tax demanded was lawful in the first place.
That omission is no longer sustainable. Tax litigation now locks up trillions of rupees, burdens businesses with years of uncertainty and leaves the State counting disputed demands as though adjudication were merely an obstacle to collection. In our April 2026 analysis, Tax cases backlog, the reported value of tax disputes pending before courts and appellate tribunals had risen from Rs. 3.76 trillion in 2024 to Rs. 5.457 trillion, with more than Rs. 3.3 trillion before the Appellate Tribunal Inland Revenue (ATIR) alone.
By July, a government review cited around 68,000 pending tribunal cases—roughly 60,000 inland-revenue matters and 8,000 customs disputes. At a disposal rate of about 1,000 cases a month, Dawn reported that the existing stock would take five to six years to clear even if no fresh appeal entered the system.
The numbers are alarming. The more important question is why the system keeps producing them.
Tax justice began as separation from the collector
The history is instructive. Income tax arrived in British India in 1860, but for decades, appellate redress remained embedded in the same administrative hierarchy responsible for assessment and collection. The conflict was obvious: the institution expected to meet revenue objectives also controlled the correction of its own errors.
Reform came after sustained criticism. The Income-tax (Amendment) Act, 1939 separated important administrative and judicial functions, and on January 25, 1941 the Income Tax Appellate Tribunal was established under section 5A of the Income-tax Act, 1922. India’s official Income Tax Appellate Tribunal history still describes the institution as dating from January 1941. It began with six members and three benches.
The principle mattered more than the structure: a taxpayer aggrieved by the revenue hierarchy would obtain an independent fact-finding forum combining legal and accounting expertise. The Tribunal was intended to be inexpensive, accessible, relatively free of technicalities and capable of producing specialist decisions.
Pakistan inherited the Income Tax Tribunal after independence. Its statutory home changed with successive income-tax laws, but its essential character survived. In 2009, when the Federal Board of Revenue (FBR) integrated direct taxes, sales tax and federal excise into the Inland Revenue structure, the Finance (Amendment) Ordinance, 2009 moved sales-tax and federal-excise appellate jurisdiction into the tribunal established under section 130 of the Income Tax Ordinance, 2001.
The Income Tax Appellate Tribunal became the Appellate Tribunal Inland Revenue. FBR itself described 2009 as the year in which direct taxes, sales tax and federal excise administration were integrated.
The Customs Tribunal has a separate lineage. The Customs Act, 1969 did not originally contain today’s tribunal arrangement. The Finance Act, 1989 substituted section 194 and created the Customs, Excise and Sales Tax Appellate Tribunal with judicial and technical members. Later reforms separated the customs appellate track as inland-revenue appeals migrated to ATIR.
Pakistan therefore ended up with two specialised federal tax tribunals, but not one coherent tax-justice system.
The paradox of expensive members and thin institutions
The government’s recent response has focused heavily on the people sitting on the bench. The ATIR Appointment Rules, 2024 provide private-sector members the pay, allowances and privileges of High Court judges, while the Chairperson receives those of a Chief Justice of a High Court. Government officers appointed to the Tribunal retain their pay and allowances and receive an additional monthly tribunal allowance of Rs. 700,000.
This was supposed to attract talent and improve disposal. By July 2026, however, twenty-four private-sector members were reportedly receiving about Rs. 2.6 million each per month, while the backlog kept rising. A four-member committee was then constituted to assess whether the expensive recruitment had actually improved performance or whether administrative and operational constraints were still holding the Tribunal back. The review itself is revealing: better remuneration may be necessary, but it is not an institutional reform.
A tribunal is not a collection of highly paid members. It is a judicial organisation. It requires a professional registry, courtrooms, trained stenographic staff, legal researchers, judgment-writing assistance, digital records, reliable cause-list management, searchable precedent, virtual-hearing facilities and an administrative cadre built around adjudication rather than ordinary departmental routines.
Public budget documents show how uneven that support can be. The 2026-27 Demands for Grants list, for example, 23 sanctioned posts for Customs Appellate Tribunal Bench-I Islamabad—seven officers and sixteen other staff. Other ATIR benches show very different and sometimes much leaner staffing patterns. These tables do not even identify a distinct professional cadre of law clerks, research attorneys or judgment writers of the kind one would expect around a superior judicial institution.
That gap matters. Modern tax disputes can turn on international taxation, treaty interpretation, transfer pricing, banking regulation, accounting standards, digital commerce, valuation, classification, constitutional limits and complex commercial evidence. Paying a member like a High Court judge while denying the bench equivalent research and judgment-writing support is institutional half-building.
The fragility became visible in February 2026 when a pen-down strike by ATIR staff in Karachi over suspension of judicial allowance brought filing and appellate work close to a standstill. Limitation periods did not stop because the registry did. Taxpayers and counsel were forced to seek emergency arrangements.
This is not an argument for unchecked allowances. It is an argument for designing the whole institution as a judicial service. Justice is produced by the bench, registry, research support, record room, technology and enforcement machinery together.
Backlog is not only a capacity problem
It is tempting to explain delay by saying there are too many cases and too few adjudicators. That is only part of the story. A system can never dispose its way out of a pipeline that manufactures avoidable litigation.
High-pitched assessments, changing interpretations, retrospective amendments, weak first-instance reasoning and mechanical departmental appeals all feed the appellate chain. FBR officials acknowledged before the National Assembly Standing Committee in June 2026 that field formations often file appeals even where legal grounds are weak because officers fear accountability proceedings if they choose not to litigate. Parliament consequently endorsed Independent Case Scrutiny Committees to filter departmental appeals.
This is an important reform because it attacks one source of unnecessary inflow. Therefore, does the government’s approved Centralised Litigation Management System, which is intended to track tax disputes, improve reporting and link officials’ performance to case outcomes. In April, Chief Justice of Supreme Court Yahya Afridi also led a high-level consultation on tax litigation stressing that government departments should not appeal issues already settled by superior courts.
FBR has also moved aggressively on the administrative side. In September 2026, it established a National Faceless Centre for risk-based audit and assessment, separating selection, audit, assessment and quality review. These measures may reduce discretion and improve the quality of orders entering the litigation pipeline.
They should be welcomed. They still do not answer the institutional question: who should finally adjudicate federal tax disputes, under what constitutional safeguards, with what support structure and through how many appellate layers?
A judgment delayed can be an economic sanction
Tax litigation is not ordinary delay. A disputed assessment can block working capital, hold up refunds, trigger recovery pressure, affect financial statements, distort provisioning and discourage investment. In our August 2026 article, Delays in Tax Tribunal: Judgements Reserved, Forgotten And Reheard, we argued that reserved cases should not disappear into an administrative black hole.
A modern tribunal should automatically record the date on which a matter was heard, the date judgment was reserved, the scheduled date of pronouncement and any reasoned extension. Digital alerts should flag overdue decisions. Rehearing should be exceptional, not the routine cure for a bench that failed to pronounce judgment.
This is where infrastructure and accountability meet. A case-management system should not merely count disposals. It should measure age of cases, age of reserved judgments, adjournments, remands, reversal rates, compliance with binding precedent and the time taken from first assessment to finality. Raw disposal statistics can reward speed without quality. A tax-justice institution must measure both.
Pakistan debated a federal specialist court two decades ago
The idea of specialised federal adjudication is not new. In 2005, the Law and Justice Commission of Pakistan examined the proposed Federal Court Bill, 2004. The draft would have created a court for commercial and financial matters, with High Court-level remuneration, case-management powers, alternative dispute resolution, a 90-day disposal target and supervision by the Supreme Court.
Crucially, the list of statutes from which appeals or references would go to the proposed court included the Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001. Report No. 68 preserves the full proposal.
That history is often recalled incompletely. The Commission did not endorse the proposed Federal Court. It unanimously recommended against establishing it in that form because of legal and constitutional complications, preferring instead to fill High Court vacancies, increase judicial strength and create specialised divisions within the High Courts. The objection was not to specialisation as such. It was to the constitutional location and design of a parallel court. That distinction matters enormously today.
Article 212A has reopened the institutional question
In July 2026, the Law and Justice Commission, chaired by Chief Justice of Pakistan Yahya Afridi, returned to the problem from a different constitutional direction. Its Law Reform Report No. 142 recommends an International Commercial Court of Pakistan as a specialised Federal Superior Court through a new Article 212A of the Constitution.
The proposal is designed primarily for international commercial disputes and arbitration. But the draft goes much further. Proposed Article 212A(3) expressly allows Parliament or a provincial assembly, as appropriate, to confer original or appellate jurisdiction over commercial, banking, finance, corporate, insolvency, securities, public procurement, energy, taxation and other economic matters.
The institutional safeguards are equally significant: appointment under Article 175A, High Court-level remuneration, power to make rules for court staff, expenditure charged upon the Federal Consolidated Fund, procedural autonomy, nationwide enforceability and an appellate route to a specialised bench of the Supreme Court. This does not mean the proposed International Commercial Court should automatically become Pakistan’s tax court. It means the constitutional objection that dominated Report No. 68 can now be addressed directly rather than wished away.
The National Tax Court proposal is older than the present crisis
We have argued for a unified National Tax Court for more than fifteen years. In our 2011 two-part proposal—Need for national tax court-I and Part II—we suggested merging the inland-revenue and customs appellate structures, recruiting members on judicial standards and providing a direct route to the Supreme Court on substantial questions of law.
The proposal was later developed into a draft statute and is now contained in the third edition of our book, Towards Broad, Flat, Low-rate and Predictable Taxes. The book treats the appellate system as a structural component of tax reform, not as an administrative afterthought. Its core proposition is simple: a tax system cannot be fair, predictable or growth-friendly if finality depends on years of fragmented litigation.
The 2024 edition proposed a National Tax Court with nationwide jurisdiction, specialised benches, an intra-court appellate mechanism and a limited onward route to the Supreme Court for substantial questions of law. It also sought to remove departmental appellate officers as the indispensable first tier.
That model should now be revisited rather than mechanically enacted. The law has changed since the book was finalised.
The Finance Act, 2025 omitted section 126A and restored a taxpayer’s option under the Income Tax Ordinance to approach the Commissioner (Appeals) or surrender that tier and go directly to ATIR. The FBR’s current Income Tax Ordinance archive reflects the post-2025 structure. Any National Tax Court legislation must therefore be drafted for the appellate architecture that exists now, not the one that existed in May 2024.
What a National Tax Court should actually fix
The worst outcome would be to create a grand new court and leave every old layer untouched. Pakistan does not need another forum added on top of ATIR, the Customs Tribunal, Commissioners (Appeals), Collectors (Appeals), High Courts and the Supreme Court. Reform must simplify the chain.
A workable model should begin by consolidating the federal tax tribunals into one independent institution with separate inland-revenue and customs divisions where technical specialisation requires it. The first appeal from an original departmental order should reach an adjudicator institutionally independent of FBR. Internal departmental review can still exist as an optional dispute-prevention mechanism; it should not masquerade as independent justice.
Appointments should combine judicial competence with tax, accounting, customs and commercial expertise, but the institution must control its own registry and staff. Law clerks and professional judgment writers should be recruited transparently. A national research service should maintain a searchable database of Supreme Court, Federal Constitutional Court, High Court and tribunal precedents, with an internal mechanism to identify conflicting bench decisions quickly.
Every case should be e-filed. Every hearing should have an electronic docket. Virtual appearances should be routinely available where evidence does not require physical presence. Reserved judgments should be tracked publicly. Orders should be uploaded promptly in searchable form. Cause lists, adjournment history and case age should be visible.
Performance should be judged by more than disposal counts. A member who decides hundreds of cases that are routinely reversed has not necessarily improved tax justice. Metrics should include time to decision, remand rates, reversal rates, compliance with binding precedent, age of reserved judgments and the proportion of issues resolved without further appeal.
The State must also become a responsible litigant. Independent scrutiny committees should be required to certify departmental appeals above the tribunal level, with reasons. Repetitive appeals on settled questions should carry institutional consequences. Costs need to become real enough to discourage frivolous litigation by both sides.
Specialisation works elsewhere because independence is designed in
Pakistan need not copy another jurisdiction, but comparisons show the institutional principle. The United Kingdom’s First-tier Tribunal (Tax Chamber) is expressly independent of HM Revenue and Customs and other government bodies whose decisions it reviews. Appeals on law move through the Upper Tribunal before entering the ordinary appellate court structure.
Canada operates a specialist Tax Court whose stated mission includes an accessible and efficient appeal process before a fair and independent court. India, from which Pakistan shares the 1941 institutional ancestry, has expanded its Income Tax Appellate Tribunal to 63 benches at 27 stations.
The lesson is not that any one model is perfect. It is that specialised tax adjudication needs institutional independence, technical competence, professional administration and a coherent appellate route.
Do not confuse digitising FBR with reforming tax justice
Pakistan is now undertaking important technological reforms: faceless audits, case scrutiny, digital litigation management and greater use of data. These can reduce corruption, improve record keeping and stop some weak cases before they reach the courts.
However, tax administration and tax adjudication are different constitutional functions. Making the collector more efficient does not make the appellate forum independent. Giving a tribunal better salaries does not give it a research service. Creating a dashboard does not ensure consistent jurisprudence. Hiring more members does not solve incentives that generate weak assessments and automatic appeals.
The reform question must therefore be asked in the correct order. First, reduce the disputes generated by bad administration. Second, filter departmental appeals. Third, professionalise and digitalise the adjudicatory machinery. Fourth, consolidate specialised tax adjudication into an institution whose independence is constitutionally credible. Finally, reserve the highest court for questions that genuinely require authoritative national determination.
Tax justice is fiscal infrastructure
Pakistan often treats tax litigation as money stuck in court. That language is revealing. Not every disputed rupee is revenue delayed; some demands are unlawful and should never have been raised. The purpose of adjudication is precisely to separate lawful revenue from unlawful demand.
A credible system benefits both sides. Taxpayers gain certainty, working capital is released, and investment decisions can be made against predictable law. The State gets faster finality for sustainable demands and can stop carrying fictional receivables through years of litigation. Administrators receive authoritative guidance for future assessments.
The Income Tax Appellate Tribunal was created in 1941 because adjudication needed distance from collection. Eighty-five years later, Pakistan has rediscovered the same problem on a much larger scale.
The choice should not be framed as ATIR versus a new court, or Customs Tribunal versus commercial court. The real question is what institutional design can deliver independent, expert, nationally consistent and timely tax justice without adding another layer of delay.
The proposed Article 212A has opened a constitutional window. Pakistan can use it to create a taxation division within the proposed International Commercial Court, or enact a dedicated National Tax Court on a similarly secure constitutional foundation. Either approach deserves serious public and parliamentary debate.
What should not survive is the present compromise: High Court-level salaries for some members, ordinary departmental support for the institution, fragmented appellate paths, uneven technology and tens of thousands of disputes waiting for finality.
Tax justice is not a favour to the taxpayer. Nor is it an impediment to revenue collection. It is fiscal infrastructure. A State that can determine quickly and independently what a citizen lawfully owes will collect more durable revenue than one that merely raises larger demands and waits years to discover whether they were legal.