Pakistan’s tax justice system is facing a deep structural crisis, with more than Rs5.457 trillion tied up in pending litigation across various judicial forums. The issue was strongly highlighted in a landmark case, Commissioner of Inland Revenue, Lahore v Bank of Punjab (2022), where the Supreme Court of Pakistan criticised tax authorities for unnecessarily prolonging disputes and wasting judicial resources.
A significant portion of this backlog—over Rs3.33 trillion—is stuck at the Appellate Tribunal Inland Revenue level, while superior courts are handling cases involving nearly Rs2 trillion. The Supreme Court itself is dealing with thousands of tax cases, reflecting a system overwhelmed by excessive and repetitive litigation.
Experts argue that Pakistan’s tax system has evolved into a “litigation-based governance” model, where authorities frequently challenge decisions at every stage, even in settled matters. This approach not only delays justice but also erodes taxpayer confidence and increases compliance costs.
The multi-layered adjudication process—ranging from tax authorities to tribunals, high courts, and ultimately the Supreme Court—adds complexity, time, and financial burden. Inconsistent rulings across different benches further encourage appeals, worsening the backlog.
Legal and economic analysts have proposed major reforms, including the creation of a unified National Tax Tribunal to streamline dispute resolution and reduce unnecessary litigation. Strengthening alternative dispute resolution (ADR) mechanisms and introducing digital solutions like e-filing, virtual hearings, and AI-based case management are also seen as critical steps.
The impact of this backlog goes beyond the legal system. Trillions of rupees locked in unresolved disputes affect economic activity, government revenue, and investor confidence. Experts warn that without comprehensive reforms, the situation could further strain Pakistan’s economy and weaken trust in its legal and taxation systems.
