To make expeditious out-of-court settlement of tax-related disputes happen, the National Board of Revenue (NBR), the country's highest tax authority, introduced the Alternative Dispute Resolution (ADR) system in the fiscal year 2011-12. Quick disposal of a number of such long-pending cases of NBR with some large multinational corporate houses through ADR looked encouraging. It was so because, according to media reports, some 30,000 cases in three areas including income tax, VAT and customs were lying with the NBR's tribunal and the High Court (HC). The estimated revenue involved in those cases is worth Tk490 billion. So, ADR could be an ideal approach to break the logjam in settling tax-related cases, if it ensured a win-win solution for both the NBR and the taxpayer. But in a recent development, the revenue authority is learnt to have gone for reviewing about a dozen of such cases with large taxpayers settled through ADR earlier, because the outcomes were not at all win-win. Worse yet, the government did not get a single farthing out of a revenue claim amounting to Tk5.61 billion made against those cases thus settled through ADR. Evidently, it has been unsettling enough for the NBR authorities to opt for reinvestigation of the matter.
In one such case, for instance, the Large Taxpayers Unit (LTU), VAT, of the NBR, filed two cases in 2016 making a claim of tax amounting to Tk1.57 billion against a multinational company. But the said company next year (in 2017) challenged the LTU's claim by lodging a writ petition with the HC. However, later, upon the company's petition for ADR, the LTU had the case resolved expeditiously (within two months). But the settlement facilitated by a third party, as is the practice under the ADR system, resulted in writing off of the NBR's entire claim. The LTU, in fact, consented to the facilitator's suggestion in favour of the company. The loss of such a huge amount of revenue naturally raised questions among the NBR high-ups. Hence is the NBR's urgency for constituting a review committee to look into one of the lost cases.
If any anomaly is discovered in the process of dispute settlement in the particular case under investigation, the body reviewing the issue would be required to pinpoint it and recommend measures to avoid repetition of the same in the future. Under any circumstances, loss to the public exchequer through such dispute settlement will be self-defeating. However, some experts are at variance with the NBR's stance of reopening cases already settled through ADR as it has its legal ramifications.
Moreover, by reopening cases, the basic premise of the ADR system and the relevant law that the dispute settlement is done on the basis of a consensus between the contending parties, the taxpayer and the NBR, is challenged. The issue gets further complicated if one of the parties has objection to the claim made by the other. In that case, the settlement cannot be a win-win one. Notably, in the case under review, the dispute was settled by LTU's acceptance of the taxpayer's objection that the tax charged by the NBR on it was an instance of 'double taxation' and, also, of 'direct tax'. Arguments apart, the very fact that the NBR is dissatisfied with the disposal of some tax-related disputes through ADR demands reassessment of the entire exercise to ensure that the system is foolproof. The NBR also needs to examine the role of taxmen involved with the ADR cases in question.
