FBR picks about 42,000 cases for tax audit
Move aimed at catching taxpayers giving incorrect information.
In the first two months of the current fiscal year, revenue collection stood Rs16 billion below the target. ILLUSTRATION: JAMAL KHURSHID/FILE
ISLAMABAD:
After three previous failed attempts, tax officials have selected about 42,000 cases for audit through a computerised ballot in an effort to give a boost to revenue collection and discourage the deep-rooted culture of tax evasion.
The ballot held at the Federal Board of Revenue (FBR) headquarters here on Friday was distinct from the past on at least two accounts, which may give hope for some success this time.
First, the government has committed to the International Monetary Fund that it will increase audit of taxpayers from existing 2.2% of total returns filed to 4.2% this year.
Second, the FBR claims that it has performed this time the task of choosing people in an objective manner unlike the past when certain predetermined parameters were challenged in courts by taxpayers.
The audit move comes at a time when the FBR is finding it hard to meet monthly tax targets. In the first two months of the current fiscal year, revenue collection stood Rs16 billion below the target.
The cases selected cover both corporate and non-corporate taxpayers, including individuals, for the audit of income tax, sales tax and federal excise duty for fiscal year 2011-12. The ballot picked 5% or 41,727 out of total 834,563 returns filed for income tax, sales tax and federal excise duty.
The figure of 834,563 speaks volume about the corruption, tax evasion and inefficiency of the FBR that has not been able to expand the tax base, in part due to lack of political will to promote tax culture.
Of the total, income tax filers from both corporate and non-corporate sectors were 735,188. Of these, 1,163 corporate cases and 35,595 non-corporate cases have been selected for audit.
In the area of sales tax, the number of filers stood at just 98,966, of which 570 companies and 4,381 non-corporate cases will be audited. In federal excise duty, a total of 409 returns were filed and the FBR has selected 18 cases for audit.
FBR Chairman Tariq Bajwa stressed that tax authorities had decided to take certain steps to increase sales tax registration in the country.
He clarified that the random selection of those who filed tax returns did not mean all these people and companies had evaded taxes. Those who would receive audit notices should not panic as the FBR wanted to confirm whether they had honestly declared their income and sales details in the returns, he said.
Bajwa pointed out that computer-generated notices would be served that would carry a bar code, but the taxpayers should not take the notice seriously that did not have the bar code.
“We are mindful that the taxpayers may again take the FBR to court, but this time we have devised a mechanism to defend ourselves in any court of law,” said Bajwa, referring to challenges filed by the taxpayers in courts in the past.
He said the FBR was following a self-assessment policy, believing the taxpayers would honestly declare their assets and liabilities, but a robust audit was essential to remind them that they could be caught for giving misleading and incorrect information.
In addition to the selected cases, the FBR will also conduct a desk audit in cases where commissioners believe that return filers have under-stated their income and sales.
Saying that there was a significant gap between tax collection and tax potential, he stressed that they had planned three types of intervention to narrow down the gap.
In addition to the audit, the FBR is sending notices to potential taxpayers and those who are paying taxes but do not declare their actual income. He was hopeful that these interventions would increase revenues by at least 13%.
Published in The Express Tribune, September 14th, 2013.
After three previous failed attempts, tax officials have selected about 42,000 cases for audit through a computerised ballot in an effort to give a boost to revenue collection and discourage the deep-rooted culture of tax evasion.
The ballot held at the Federal Board of Revenue (FBR) headquarters here on Friday was distinct from the past on at least two accounts, which may give hope for some success this time.
First, the government has committed to the International Monetary Fund that it will increase audit of taxpayers from existing 2.2% of total returns filed to 4.2% this year.
Second, the FBR claims that it has performed this time the task of choosing people in an objective manner unlike the past when certain predetermined parameters were challenged in courts by taxpayers.
The audit move comes at a time when the FBR is finding it hard to meet monthly tax targets. In the first two months of the current fiscal year, revenue collection stood Rs16 billion below the target.
The cases selected cover both corporate and non-corporate taxpayers, including individuals, for the audit of income tax, sales tax and federal excise duty for fiscal year 2011-12. The ballot picked 5% or 41,727 out of total 834,563 returns filed for income tax, sales tax and federal excise duty.
The figure of 834,563 speaks volume about the corruption, tax evasion and inefficiency of the FBR that has not been able to expand the tax base, in part due to lack of political will to promote tax culture.
Of the total, income tax filers from both corporate and non-corporate sectors were 735,188. Of these, 1,163 corporate cases and 35,595 non-corporate cases have been selected for audit.
In the area of sales tax, the number of filers stood at just 98,966, of which 570 companies and 4,381 non-corporate cases will be audited. In federal excise duty, a total of 409 returns were filed and the FBR has selected 18 cases for audit.
FBR Chairman Tariq Bajwa stressed that tax authorities had decided to take certain steps to increase sales tax registration in the country.
He clarified that the random selection of those who filed tax returns did not mean all these people and companies had evaded taxes. Those who would receive audit notices should not panic as the FBR wanted to confirm whether they had honestly declared their income and sales details in the returns, he said.
Bajwa pointed out that computer-generated notices would be served that would carry a bar code, but the taxpayers should not take the notice seriously that did not have the bar code.
“We are mindful that the taxpayers may again take the FBR to court, but this time we have devised a mechanism to defend ourselves in any court of law,” said Bajwa, referring to challenges filed by the taxpayers in courts in the past.
He said the FBR was following a self-assessment policy, believing the taxpayers would honestly declare their assets and liabilities, but a robust audit was essential to remind them that they could be caught for giving misleading and incorrect information.
In addition to the selected cases, the FBR will also conduct a desk audit in cases where commissioners believe that return filers have under-stated their income and sales.
Saying that there was a significant gap between tax collection and tax potential, he stressed that they had planned three types of intervention to narrow down the gap.
In addition to the audit, the FBR is sending notices to potential taxpayers and those who are paying taxes but do not declare their actual income. He was hopeful that these interventions would increase revenues by at least 13%.
Published in The Express Tribune, September 14th, 2013.