Rebuilding tax justice—I Time for National Tax Court

Tax reform in Pakistan almost always begins with rates, exemptions, documentation, enforcement (now faceless as well!) and revenue targets. It rarely begins where the credibility of every tax system is ultimately tested: what happens when the State and taxpayer disagree? A lawful tax is a compulsory exaction. Precisely because payment is compulsory, an independent, competent and expeditious forum for challenging the State is not a concession to taxpayers. It is part of the legitimacy of taxation itself.

Pakistan once understood this principle better than it does today. Income tax was introduced in British India in 1860, but for decades there was no genuine separation between collection and appellate adjudication. Tax officers operated within the same administrative hierarchy; the Commissioner responsible for revenue administration also exercised appellate authority.

Public dissatisfaction eventually produced an institutional break. The Income-tax (Amendment) Act, 1939 separated important administrative and judicial functions and, on January 25, 1941, the Income Tax Appellate Tribunal was constituted under section 5A of the Income-tax Act, 1922.¹

The object was remarkable for its time. An aggrieved taxpayer could obtain redress from a body outside the ordinary tax-collection hierarchy, combining legal and accounting expertise. The Tribunal was meant to be inexpensive, accessible, relatively free from technicalities and capable of quick disposal by members possessing specialised knowledge.

Pakistan inherited it at independence. On October 28, 2009, after the reorganisation of income tax, sales tax and federal excise administration into Inland Revenue, it was renamed the Appellate Tribunal Inland Revenue (ATIR). Its essential character remained that of the final fact-finding forum in federal inland-revenue disputes.²

Customs followed a different route. The Customs Act, 1969 did not originally create the present appellate tribunal. Through the Finance Act, 1989, section 194 was substituted and the Federal Government was empowered to constitute the Customs, Excise and Sales Tax Appellate Tribunal with judicial and technical members.

Later statutory changes produced the present Customs Appellate Tribunal. Thus, Pakistan came to possess two specialised federal appellate institutions: ATIR for inland revenue and a separate tribunal for customs.³

Their rationale remains sound. Their present architecture does not. ATIR decides disputes involving income tax, sales tax and federal excise, including corporate taxation, banking, international transactions, transfer pricing, withholding, anti-avoidance provisions and accounting questions.

The Customs Appellate Tribunal determines classification, valuation, origin, confiscation, penalties and other issues directly affecting international trade. These are not minor administrative offices. Their decisions determine private rights, public revenue and the interpretation of federal fiscal statutes.

The scale of the present problem is revealing. Our April 2026 analysis, based on figures then supplied to the Prime Minister, recorded over Rs. 3.3 trillion in disputes before ATIR and more than 21,000 active cases. By July 2026, official estimates reported in the press put total pendency before tax tribunals at about 68,000 cases—around 60,000 inland-revenue matters and 8,000 customs disputes. Different reporting dates and methods explain part of the variation, but not the conclusion: congestion remains severe.⁴

The government tried to answer the problem by paying more. Under the ATIR Appointment Rules, 2024, private-sector members became entitled to pay, allowances and privileges admissible to High Court judges; the Chairperson to those of a Chief Justice of a High Court.

Members drawn from specified government categories retain their pay and receive an additional monthly tribunal allowance of Rs. 700,000. Twenty-four private-sector members were later reported to be drawing around Rs. 2.6 million each per month.⁵

Remuneration comparable to the superior judiciary is defensible if the institution is expected to perform comparable judicial work. Salary, however, cannot substitute for an institution.

A tribunal also needs a professional registry, adequate courtrooms, trained stenographic and secretarial staff, legal research support, judgment-writing assistance, reliable records, digital filing, real-time case tracking, research databases and functioning virtual-hearing facilities.

Our earlier work repeatedly recorded complaints about lack of facilities; more recent analysis found fragmented case management, absence of an integrated real-time dashboard and virtual hearings still largely missing.⁶

The weakness at staff level became impossible to ignore in February 2026 when a pen-down strike by ATIR employees in Karachi virtually halted filing and appellate work after suspension of judicial allowance. Statutory limitation periods continued to run while the institution receiving appeals was itself partially paralysed. The episode exposed a fundamental contradiction: judges or members can be paid at one level while the registry and supporting machinery needed to deliver justice remain treated as an ordinary attached office.⁷

Justice is produced by an institution, not by the salary cheque of the person sitting on the Bench. A member without research assistance, efficient registry support, proper records and timely transcription is being asked to deliver specialised commercial justice through an administrative structure that has never been redesigned around the nature of the judicial work. There is a deeper constitutional difficulty. Both ATIR and the Customs Appellate Tribunal perform judicial or quasi-judicial functions while remaining structurally tied to the Federal Executive.

For decades we have argued that this sits uneasily with the principle declared by the Supreme Court that separation of judiciary from executive is a cornerstone of judicial independence. Our proposal, first developed in detail more than fifteen years ago, was to merge the inland-revenue and customs tribunals into a single National Tax Tribunal, recruit members on judicial standards and place the institution outside the revenue administration and executive chain of command.⁸

That proposal has since evolved into a National Tax Court. The third edition of our book, Towards Broad, Flat, Low-rate and Predictable Taxes, contains a draft National Tax Court Bill. It provides for nationwide jurisdiction, specialised benches, independent appointments, a professional staff structure comparable with the High Courts and an ultimate appellate route to the Supreme Court.

The purpose is not to create another layer. It is to replace fragmented appellate architecture with specialised, uniform and constitutionally independent adjudication.⁹

Pakistan has already travelled surprisingly close to this idea. Law and Justice Commission Report No. 68 considered the Federal Court Bill, 2004 for expeditious adjudication of commercial and financial matters. The proposed court would have exercised appellate jurisdiction over, among other federal laws, the Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001.

It contemplated High-Court-level remuneration, a ninety-day decision period, nationwide benches, case management, alternative dispute resolution and supervision by the Supreme Court. The proposal was broader than a tax court, but its inclusion of the principal federal tax statutes makes it an important institutional precursor.¹⁰

History has now returned to the same question. In 2026, the Law and Justice Commission chaired by Chief Justice Yahya Afridi recommended an International Commercial Court of Pakistan as a specialised Federal Superior Court through proposed Article 212A of the Constitution. Significantly, the draft expressly permits Parliament to vest that court with jurisdiction over taxation and other economic and commercial matters. It also provides constitutional safeguards, financial security, procedural autonomy and a specialised appellate route to the Supreme Court.¹¹

This is an opportunity for serious debate, not institutional multiplication. Pakistan must decide whether tax jurisdiction should form a dedicated division of the proposed federal commercial court or, as we have long advocated, be entrusted to a separate National Tax Court designed exclusively around federal tax disputes.

What should no longer be defensible is the present halfway house: two specialised tribunals performing judicial functions without the complete institutional apparatus, independence and accountability of a judicial system.

The Income Tax Appellate Tribunal was created in 1941 because those collecting tax should not have final control over adjudicating the disputes produced by collection. Eighty-five years later, the same principle demands its logical completion. Pakistan does not merely need better-paid ATIR and Customs Tribunal members. It needs tax justice designed as justice.

Endnotes

1. Huzaima Bukhari & Dr Ikramul Haq, Platinum jubilee of Tax Tribunal, Business Recorder, January 22, 2016; Dr Ikramul Haq, Delays in Tax Tribunal: Judgements Reserved, Forgotten And Reheard, The Friday Times, August 8, 2026.
2. For the history, composition and later renaming of the Tribunal, see Towards Broad, Flat, Low-rate and Predictable Taxes, Third Edition, PRIME Institute, November 2024, and Appellate Tribunal Inland Revenue, Ministry of Law and Justice.
3. Finance Act, 1989, amendments to the Customs Act, 1969, establishing the Customs, Excise and Sales Tax Appellate Tribunal; see the Gazette text hosted by the National Assembly and the Customs Act, 1969 (official FBR compilation).
4. Huzaima Bukhari, Dr Ikramul Haq & Abdul Rauf Shakoori, Tax cases backlog, Business Recorder, April 24, 2026; Mubarak Zeb Khan, Panel to review tax tribunal performance, Dawn, July 18, 2026.
5. Appellate Tribunal Inland Revenue (Appointments, Terms and Conditions of Service) Rules, 2024, Ministry of Law and Justice, SRO 690(I)/2024, May 15, 2024; Panel to review tax tribunal performance, Dawn, July 18, 2026.
6. On structural and operational deficiencies, see Tax cases backlog, Business Recorder, April 24, 2026; and Delays in Tax Tribunal: Judgements Reserved, Forgotten And Reheard, The Friday Times, August 8, 2026.
7. Strike of ATIR staff brings appellate process to a standstill, Business Recorder, February 17, 2026.
8. Huzaima Bukhari & Dr Ikramul Haq, Budget proposals—I: Need for national tax court, Business Recorder, May 6, 2011; Budget proposals—II: Need for national tax court, May 7, 2011; and Subverting tax tribunals, January 24, 2020.
9. Huzaima Bukhari & Dr Ikramul Haq, Towards Broad, Flat, Low-rate and Predictable Taxes, Third Edition, PRIME Institute, November 2024, Appendix E: National Tax Court Bill, 2025.
10. Law and Justice Commission of Pakistan, Law Reform Report No. 68: Establishment of the Federal Court, 2005. The draft placed appeals and references under the Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001 within the proposed Federal Court’s jurisdiction.
11. Law and Justice Commission of Pakistan, Law Reform Report No. 142: Establishment of the International Commercial Court of Pakistan, 2026. Proposed Article 212A(3) expressly permits jurisdiction over taxation and other economic and commercial matters.

[To be continued]

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Huzaima Bukhari, lawyer and author, has been Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE). She also served Civil Services of Pakistan from 1984 to 2003.

Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.