Govt introduces Income Tax Amendment Act 2025 to streamline tax dispute resolution

The federal government on Wednesday introduced the Income Tax (Amendment) Act 2025, aimed at establishing a more efficient and transparent system for resolving tax and financial disputes through Alternative Dispute Resolution (ADR) mechanisms.

According to the bill, tax disputes of up to Rs 50 million can now be referred to the ADR committee instead of conventional courts, offering taxpayers and institutions a faster and less expensive route to justice.

Under the proposed legislation, the Federal Board of Revenue (FBR) will set up a special committee for the resolution of tax-related cases. The committee will be chaired by a retired judge of the High Court or Supreme Court, with mandatory experience in handling tax matters. The FBR chairman will propose a panel of three names for the position of chairperson, from which the final appointment will be made.

The ADR committee will also include a Grade-21 FBR officer and a representative of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), ensuring that both government and business perspectives are represented in the decision-making process.

Redressal System for Financial Institutions Introduced

In addition to tax disputes, the Income Tax Amendment Act 2025 also introduces an alternative mechanism for addressing public complaints against financial institutions, including banks, financial companies, and government-owned entities.

The new framework allows any citizen or institution to lodge a complaint supported by documentary evidence. The ADR will then assess the case, hold hearings for both sides, and issue a written decision.

Types of complaints that may be referred include breach of contract, poor services, financial losses, maladministration, or any form of abuse. If the ADR finds merit in a complaint, it may advise the parties to resolve the issue through mediation or conciliation, both conducted in a neutral and impartial environment.

The mediation process will ensure that both parties have equal opportunity to present their case, while the conciliation process will be voluntary and facilitated by the ADR as a neutral party. Any agreement reached through these mechanisms will hold legal status, and the implementation of ADR decisions will be mandatory.

In case of non-compliance, the ADR will notify the relevant authority for necessary action. However, if a party believes the decision contains a legal flaw, they may apply to a court for review.

A Step Toward Efficient Justice

The government has described the establishment of ADR mechanisms as a step toward providing a cost-effective, transparent, and speedy system for resolving tax and financial disputes, thereby reducing the burden on courts and improving trust in fiscal administration.

Officials said the new system is designed to promote fairness, efficiency, and accountability, while also encouraging voluntary compliance among taxpayers and fostering a business-friendly environment in the country.