New audit policy feared to beget corruption

KARACHI: New audit policy, withdrawing exemption from auditing granted to certain taxpayers, may beget corruption as the decision restored the discretionary power for the tax officials, analysts said on Saturday.   

Syed Rehan Hasan Jafri, president of Karachi Tax Bar Association (KTBA) said the Federal Board of Revenue (FBR) revived the old tax law and tax officials were given the assessment power.

Jafri said the FBR is already facing a decline in the number of annual returns filing due to harassment.

“The inclusion of all cases for audit under the new policy will further discourage returns filing,” he added.

The Karachi Tax Bar Association president said the FBR practiced the policy of self assessment for 10 to 12 years under a reform program of the World Bank. “Instead of finding a new avenue and improving the existing system the FBR is moving backward,” he added.

In January, the FBR reintroduced the audit policy under which exemption from the audit granted to various economic sectors was withdrawn. Later, the FBR conducted computer balloting and selected 93,277 cases for audit of those persons/companies, who had filed returns for the tax year 2015.

Tax experts said the commissioners Inland Revenue were empowered to select any audit case.

Business community dislikes the FBR decision, saying it would promote corruption in the taxation system. Various categories of taxpayers were included in the audit policy, which would cause wastage of time for the FBR and increase unnecessary burden on taxpayers.

Zubair Tufail, president of the Federation of Pakistan Chambers of Commerce and Industry said the apex trade body will take up the issue in a meeting with the FBR chairman, which would be held next week.

Tufail said commercial importers have been selected under the audit policy 2016 despite the fact that such taxpayers are contributing substantial taxes to national exchequer. 

Around 22 percent tax has been imposed on importers. This includes 17 percent sales tax, three percent value-added tax and another two percent on sale to unregistered persons.

FPCCI president said persons drawing annual salary of Rs1.5 million should be excluded from the audit.

Shamim Firpo, president of the Karachi Chamber of Commerce and Industry said new audit policy authorised the tax officials to exercise their discretionary power.

Firpo said such discretionary powers would only lead to corruption and harassment.

“The FBR is continuously ignoring the business community while making policies,” he said. “The FBR has not consulted with the Karachi chamber while formulating the audit policy.”

Saleem Mandviwala, chairman of Senate Standing Committee on Finance condemned the FBR decisions of selecting compliant taxpayers for audit. 

“It would be counterproductive to bring new taxpayers into the net,” Mandviwala said in a statement.

He said the Federal Board of Revenue was provided with the data of 0.7 million rich people, but it is squeezing the existing taxpayers.