A committee has been formed by the Large Taxpayers Unit (LTU), Karachi to find out high-risk areas. The proposed committee comprises a collector (audit) and commissioner (audit). The committee's primary goal is to accretion those high-risk areas of tax evasion and set forth its recommendation to penalise the violators.
LTU officials told Business Recorder on Monday that the initiatives were taken on the directive of Member (Audit), who asked Karachi and Lahore LTUs to constitute audit teams for income and sales tax.
They said that the proposed audit committee would select cases sector-wise and find out reasons behind the low tax payments, besides suggesting steps to overcome the exiting problems to improve the tax base. Recently, the Central Board of Revenue (CBR) chairman expressed concerns over the small tax collections from different sectors except banking, petroleum and telecom sectors.
Officials said that the committee had set the criteria for selection of a unit for audit in which return would be selected for audit on the basis of financial and tax performance. The committee would also ascertain reasons behind unexplained financial losses are claimed by the taxpayers, in addition to their consistently low paid or no tax, officials said.
The selection criteria would not be disclosed to the taxpayers. It has been ensured that the case selection be made without specifying name of company only taking into account the company's data. The new audit criteria is being finalised keeping in view the prevailing business environment, growth in economic sectors, government policies and directives, past experiences, taxpayers trends, growth in particular sector and international trends.
It may be worth mentioning here that the CBR in its July-December, 2006 report said "the country's tax effort expressed as a percentage of revenue collection to GDP is effected by a number of factors.
These include: composition of revenues (income relative to consumption taxes), distortions introduced by the taxation system (level and composition of exemptions provided under the tax system to various economic activities and individuals in the economy), shift from to collect taxes (for instance, customs tariff) to hard to collect taxes (VAT), problems in enforcement due to insufficient institutional capacity and political lobbying and the level of tax evasion and tax avoidance in the economy."
This indicated that a comprehensive audit system needed to bridge the gap of revenue collection with the GDP growth, officials added. Mukhtar Ahmed Gondal, Director General LTU Karachi confirmed the formation of audit committee and said that the process was the part of national audit policy to make the tax system transparent. He said that audit would not be coercive and it would be done on transparent basis for all the companies.
Gondal said that it would remove discrimination among taxpayers because some times taxpayers paying with honesty on the other hand some are not paying the real tax so "audit can be meant for corrective measures". He said that LTUs selected for audit because the taxpayers within these units were well documented and easy to identify their tax compliance.
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