The Senate Panel on Finance approved the Income Tax (Third Amendment) Bill 2025 on Tuesday. The bill introduces major changes to Pakistan’s tax dispute resolution system.
The reforms aim to address long-standing issues of delay, lack of transparency, and poor compliance by the Federal Board of Revenue (FBR). The committee, chaired by Senator Saleem Mandviwalla, reviewed the bill’s provisions that restructure the Alternative Dispute Resolution (ADR) mechanism.
Officials told the Senate Panel that the Supreme Court recently directed the government to improve the ADR system. The goal is to reduce the burden of tax litigation and ensure timely settlement of disputes.
Senator Mandviwalla criticized FBR for a “persistent pattern of non-compliance,” saying the authority only acted under Supreme Court pressure. He noted that the old system allowed FBR to appoint ADRC chairpersons at its discretion, which weakened public confidence.
Under the new law, the ADR Committee will be led by a retired High Court judge, ending FBR’s discretionary control. Taxpayers will nominate three retired judges, and the FBR chairman must select the committee head. The ADRC will be required to issue a decision within 90 days, reducing prolonged disputes.
FBR officials acknowledged that taxpayers had long raised concerns about neutrality and transparency. They said the revised rules would restore trust and lower the litigation burden on courts. The bill also allows government-owned companies to use the ADR system, a right previously unavailable to them.
Senator Farooq H. Naek emphasized that only judges with strong experience in tax and commercial law should lead ADR bodies. Senator Abdul Qadir suggested that all eligible retired judges be considered to maintain a large pool of qualified candidates.
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Lawmakers said the reforms mark a major step toward a more predictable, transparent, and investor-friendly tax system. The changes are expected to ease court workloads, speed up dispute resolution, and improve business confidence in Pakistan’s tax administration.
