A strong post-refund audit system would be necessary to implement the new sales tax refund system at the Large Taxpayer Unit (LTU), Islamabad where refunds would be issued without 100 percent verification of documents. The testing of new sales tax refund system at the LTU, Islamabad revealed that there is a need of authentic post-refund audit system to check misuse of the facility by the registered units.
Sources told Business Recorder on Monday that the LTU Islamabad has submitted a report to the board on testing of new sales tax refund system for issuance of refund on risk-profiling of registered persons without 100 percent verification. Without effective audit, there is a possibility of misuse of the new system by some registered units.
According to findings, sources said that the testing of the new system was successful, but there is a need of a system for carrying out post-refund audit of the taxpayers to whom refunds would be issued on the basis of their tax profiles. It has been suggested that the refunds should only be given on selective basis to the taxpayers having good profiles. As there was minimum verification of the taxpayers under the proposed system, post-refund audit should be necessary to check the authenticity of the claims.
Presently, sales tax refund is being paid after 100 percent verification of documents. In case of missing documents, refunds are not being issued due to objections. If new system runs successfully, large volume of refund would be processed through the system.
The automated refund process under the new system was tested by using various support managerial criteria simulating five different iterations on the Tax Intelligence System. The criteria and different situations were tested under a "simulation environment" based on statistical standards drafted only for LTU Islamabad taxpayers.
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