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'Disputed tax' payment for appeal filing to be abolished

ISLAMABAD (May 31 2003) : The government has decided to abolish the condition of 'disputed tax' payment at the time of filing an appeal, sources told Business Recorder here on Friday.

The tax managers have, on principle, agreed to do away with the 'disputed tax', but it is yet to be finalised either to abolish this tax in the coming budget or at a later stage.

To promote better working relationship between taxpayers and Central Board of Revenue (CBR), the tax authorities have decided to take a number of important taxation measures including extension of 'Alternate Dispute Resolution System' to all taxes and financial compensation to the taxpayers in appeal processes.

Sources said that the condition to pay part of the 'disputed tax' would be overlooked and, in due course, abolished as justice would not depend on the taxpayer's ability to pay this tax.

Furthermore, the interest imposed on tax liabilities payable after a decision by the appeals body will be considered equivalent to the interest paid to the taxpayers on the amount refunded after approval of the appeal.

The CBR would devise a system for compensation to the taxpayer equivalent to his appeal cost, provided the appeal is fully/partly accepted by the appellate authority.

The amount of compensation could be raised where CBR shows unwillingness or neglect the taxpayers' rights.

As far as 'Dispute Resolution System' is concerned, sources stated that 'Alternate Dispute Resolution', presently applicable in cases pertaining to Direct Tax and the Sales Tax, would be extended to all other levies.

To improve the quality of tax decisions, the CBR would introduce a system for distribution and dissemination of information regarding precedence cases and other important court decisions.

Sources said that the appeals and dispute resolution process is generally characterised by mutual distrust between taxpayers and the CBR.

In part, the existing system of adjudication is being used by some appellants as a means of delaying tax payment or penalties adjudged by the CBR as due.

Taxpayers using these delaying tactics have sometimes also taken advantage of the fact that some auditors had failed to give full and clear details, including copies of working papers, of the computations of the amounts to be paid, and the reasons behind them.

As a result, there are a number of cases pending in the appeals system.

This causes unnecessary delay in provision of justice. This situation is compounded by inherent time constraints in the whole appeals and adjudication process that prolong adjudication for up to 2 years or more.

One such constraint stems from opaque or incomplete information provided by CBR.

Specifically, auditors often fail to deliver audit reports and/or contravention reports with full and clear details on the computation of amounts of tax involved, the provisions of law violated, and the penal clauses under which penalties are proposed etc.

Without such details, the expeditious disposal of adjudication/appeals cases is severely hindered.

Furthermore, there is lack of knowledge among CBR staff regarding newly decided cases and precedence cases.

This results in a number of tax decisions not upheld by the appeal bodies.

As such, a large number of annulled or modified tax decisions lessen the efficiency and credibility of the CBR, sources added.

In order to build a relationship of mutual trust, the CBR is continuing to develop appeal and adjudication system and processes that are fair, expeditious and transparent.

There will be single avenue of appeal for all kinds of taxes. This will comprise initial administrative (quasi judicial) level, which, in turn will be followed by a judicial phase.
<br> The national appeals and adjudication programme will be uniformly administered across different tax disciplines, and will preserve and enhance the taxpayers' rights of appeal, ensuring the appeal system is transparent and more “user-friendly”.

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