Wants to do away with the condition of keeping audit selection parameters secret. PHOTO: AFP
The Federal Board of Revenue (FBR) has proposed changes in two sections of the Income Tax Ordinance 2001 that deal with selection criteria for the audit of taxpayers, said sources in the tax body.
They said the FBR wanted to do away with the requirement of keeping the audit selection parameters secret.
The FBR shall keep the parameters defined to select audit cases confidential, says Section 214C (1A) of the Income Tax Ordinance. The amendment had been introduced through Finance Act 2013.
Sources said the FBR proposed that the section may be deleted so that taxpayers could know the base for selection of their case for audit.
In February this year, the Lahore High Court had suspended the 2015 Audit Policy of the FBR, ordering tax authorities to set new principles for the selection of taxpayer audit cases.
According to another proposal, the FBR seeks the removal of Section 214D of the Income Tax Ordinance. According to the section, a person shall be automatically selected for audit, if he does not file income tax return within due date or the tax is not paid.
Sources said this had become a major issue as over 200,000 taxpayers had so far been picked for audit. The FBR wants to pick cases only on the basis of parametric audit as it does not have the capacity to deal with hundreds of thousands of cases.
After the introduction of Universal Self-Assessment Scheme in the middle of last decade, the audit of taxpayers has become a huge issue for the FBR. Taxpayers have been resisting the audit on one pretext or the other.
Owing to lack of enforcement and the FBR’s failure to undertake a meaningful audit, a majority of taxpayers do not fully declare their assets and income.
Last year, the FBR introduced a new tax policy, claiming it would bring a paradigm shift after it started risk-based audit. However, it did not disclose risk parameters in the 2016 policy, citing legal obstacles.
Under the policy, the FBR selected 92,000 cases for audit, which were 7.5% of the total income tax, sales tax and federal excise duty returns filed by the taxpayers on the basis of 2015 income. The 92,000 cases were in addition to about 37,000 pending cases under the previous policy.
Sources said the FBR did not have requisite and trained human resources to undertake such a huge task.
They said the FBR was now considering settling the old cases by asking the taxpayers to pay about 30% more than the current year’s tax amount. In cases, where taxpayers show zero income, the FBR is demanding Rs30,000 minimum tax from the people selected for audit. This would help settle more than 90% of the pending cases.
The FBR is eying to get a big chunk of revenue from the settlement of old audit cases, which will help to reach close to the current fiscal year’s target of Rs3.5 trillion.
The pending audit cases also came up for discussion in a meeting between FBR Chairman Dr Mohammad Irshad and the Lahore Tax Bar Association. The legal fraternity demanded that audit issues should be settled with a maximum 25% increase in tax.
They also demanded that raids on business premises should only be conducted with prior approval of a chief commissioner and this authority should not be delegated to commissioners.
Published in The Express Tribune, May 14th, 2017.
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