Now that the Central Board of Revenue (CBR), is reported to have started sector-wise selection of cases for audit, subsequent to the scanning of taxpayer's profiles to pinpoint high-risk cases, it will appear that the way has been found for tiding over impediments to the working of the new audit policy.
Reference, in this regard, has been made to a division of Large Taxpayer Units (LTUs) of Karachi/Lahore into different sectoral categories. For without specifying the identity of the companies, the selection criteria have been applied on the tax profiles and returns.
A news report, making this welcome disclosure that the new action strategy, the computer checks the profiles based on 15-20 different parameters to select cases for audit. Again, as pointed out in the news report, the CBR has already finalised industry profiles of different sectors, namely, automobile, cement, cigarette, fertiliser, sugar, telecom, cash business, besides several others, evidently with a view to ensuring effective audit.
As for the selection criteria, it varies from tax to tax, for understandable reasons. As such, under the new scheme of things, which has met with resistance on one count or the other, returns may now be selected for audit on the basis of financial/tax performance, which varies from industry to industry.
For, as will be noted, it has also been ensured that the case selection would be done without specifying the name of company, only taking into account the company's data. Only when the company's data matches the selection criteria, the computer would automatically select that case for audit.
More to this, provision has also been made for inclusion of unexplained losses and consistent payment of meagre or no tax, besides inconsistent data revealed by internal/external data sources. It will also be noted that according to the new strategy, until finalisation of case selection, none would have even an inkling of the concerned company's identity, which should pre-empt the possibility of collusion. That this approach would help smooth functioning of the system should become evident from yet another confidence-inspiring step devised to that end.
For, it will be only after the selection of the cases for audit, Large Taxpayer Units (LTUs), Karachi and Lahore would issue letters to the taxpayers for carrying out audit. This, certainly, should ensure production audit in a controlled environment. Moreover, the selection criteria would be kept secret from the taxpayers.
The new audit criteria has been finalised, keeping in view prevailing business environment, growth in economic sectors, government policies and directives, past experiences, taxpayers' tendency vis-à-vis growth in that particular sector, and international trends. Along with this, it has also been stated that audit of units registered with the LTU's Karachi and Lahore would help the department comprehend the taxpayers' behaviour and problems being faced by them during the entire audit proceedings.
Many and varied have been the impediments to the implementation of the new national audit plan. As such a systematic plan had to be worked out to put it into effect.
This necessitated, among other things, improvement in audit selection criteria keeping in view the experiences and practical job difficulties being faced. Along with it, due emphasis was placed on training of the audit staff in accordance with the needs and circumstances of the developing situation. All in all, the progress made in that direction, should prove instrumental in its implementation in a befitting manner.
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