Govt Plans Reforms to Reduce FBR Tax Litigation

The federal government is considering the introduction of a scrutiny committee through the Finance Bill 2026–27 to review appeals filed on behalf of the Federal Board of Revenue (FBR), as part of broader efforts to reduce frivolous tax litigation pending before courts and tribunals, according to a report by The News.

The proposal follows a detailed report submitted by a task force on pending tax litigation headed by Shad Muhammad to Prime Minister Shehbaz Sharif and members of the federal cabinet.

According to the report, Pakistan’s tax system is facing a mounting litigation burden, with approximately 85,480 tax-related cases pending before the Supreme Court, high courts, and appellate tribunals as of April 2026.

The task force noted that nearly Rs278 billion in customs revenue remains tied up in active disputes, while the actual Inland Revenue exposure could not be accurately determined due to inconsistencies between FBR records and court data.

The report stated that 1,322 cases were pending before the Supreme Court, including 909 Inland Revenue matters and 414 Customs cases.

An additional 17,410 cases were pending before high courts, comprising 11,995 Inland Revenue cases and 5,414 Customs matters.

The largest backlog was identified at the tribunal level, where 66,747 cases remain unresolved, including 60,893 Inland Revenue cases and 5,884 Customs disputes.

According to the task force, the existing disposal rate of approximately 10,000 tribunal cases annually means that the current Inland Revenue backlog alone could take nearly six years to clear, excluding any new filings.

The report further observed that almost half of customs-related cases pending before high courts are concentrated in the Sindh High Court.

Prime Minister Shehbaz Sharif had constituted the task force to undertake a comprehensive review of FBR’s legal wings and propose reforms aimed at improving litigation management and curbing unnecessary appeals.

Officials stated that the FBR has also submitted a summary seeking creation of a new post of Member Legal Reforms to supervise institutional restructuring and implementation of legal reforms.

The task force identified several structural and governance deficiencies within FBR’s legal framework, including weak coordination among policy, enforcement, and operational wings, resulting in inconsistent litigation positions before courts.

According to the findings, FBR’s Legal Management System contains significant discrepancies when compared with court records, while no effective pre-appeal scrutiny mechanism currently exists to filter weak or repetitive appeals.

The report also stated that the FBR continues to pursue appeals on legal issues already settled by superior courts and lacks a centralised repository of decided cases.

Additionally, the task force highlighted the absence of accountability mechanisms for filing frivolous appeals and noted that legal officers and advisors are not evaluated based on litigation outcomes.

The report further observed that Inland Revenue and Customs legal wings operate independently with separate hierarchies, while digital platforms such as IRIS, WeBoC, and the Legal Management System function in isolation without proper integration.

It also pointed out that appellate tribunals lack digital case management systems and noted that Alternate Dispute Resolution mechanisms under the Customs Act and Income Tax Ordinance remain underutilised despite offering faster and more cost-effective resolution of disputes.