Senate Panel Approves Income Tax Amendment Bill 2025, Overhauling Tax Dispute System

The Senate Standing Committee on Finance on Wednesday approved the Income Tax (Third Amendment) Bill 2025, introducing several changes to Pakistan’s tax dispute resolution framework. The reforms have been made after years of criticism over delays, lack of transparency and poor compliance by the Federal Board of Revenue (FBR). The committee met under the chairmanship of Senator Saleem Mandviwalla and spent considerable time reviewing the bill’s provisions that restructure the Alternative Dispute Resolution (ADR) mechanism. Officials informed the members that the Supreme Court had recently instructed the government to improve the ADR system to reduce the burden of tax litigation and ensure timely dispute settlement. Senator Mandviwalla criticised FBR for what he described as a “persistent pattern of non-compliance”, saying the authority only acted after “pressure from the Supreme Court”. He noted that the old system allowed FBR to appoint ADRC chairpersons at its discretion, which undermined confidence and discouraged taxpayers from using the platform. Under the newly approved bill, the ADR Committee will now be headed by a retired High Court judge, ending FBR’s discretionary control. Taxpayers will nominate a panel of three retired judges, from which the FBR chairman must select the committee head. The ADRC will also be bound to issue a decision within 90 days, a major shift aimed at reducing prolonged disputes. FBR officials acknowledged that taxpayers had long raised concerns about inadequate neutrality and transparency in the previous setup. They said the revised rules would restore trust and decrease litigation burden on courts. The committee also approved amendments allowing government-owned companies to file appeals through the ADR system, a right previously unavailable to them. Members argued that public-sector entities face similar tax complications and should have access to alternative resolution methods. Senator Farooq H. Naek stressed that only judges with substantial experience in tax and commercial law should head ADR bodies for credibility. Senator Abdul Qadir insisted that all eligible retired judges should be considered to avoid limiting the pool of qualified candidates. Lawmakers added that the reforms mark a major shift toward creating a more predictable, transparent and investor-friendly tax environment. They added that the overhaul is expected to ease court workloads, speed up dispute resolution and improve business confidence in Pakistan’s tax administration.