Federal Board of Revenue (FBR) has prioritised cement, textile, sugar, oil, telecom and corporate sectors for composite audit as some 113 units have been picked by the Large Taxpayers Unit (LTU), Karachi for the purpose, Business Recorder learnt on Thursday.
Sources said the board has sent a list to the LTU for combine audit of sales and income taxes. These selected units come under the prescribed criteria comprising some 16 parameters for selecting cases for joint audit. They further said that if the registered units met some 9 to 10 selection criteria, the audit would be started on immediate basis, adding it is not necessary for audit that the unit meets all the 16 selection criteria.
They said ambiguities still persist in the selection of cases, as composite audit of some 51 cases is impossible particularly in sales tax side, owing to several technical hurdles. To a question, they said, companies showing decline of over 10 percent in sales on income tax side as compared to last year's have been selected for the audit. Moreover, they said the cases pertaining to cross matching of profit/loss account expenses as per return/financial statements with the annual statements filed under section 165 of the Income Tax Ordinance, 2001 have also been chosen for combined audit.
When contacted, tax experts said that the idea was given by the World Bank (WB) to integrate both the income tax and sales tax systems. But it will not show any positive results unless the records of both systems are reconciled in an effective manner, they opined. They underlined the need that the authority concerned should reconcile all the related information regarding composite audit and make it compatible for auditors to handle the same.
They further said the board was of the view that taxpayers were facing hardships to deal with both direct and indirect taxes separately. Therefore, it has been decided to incorporate both taxes to facilitate the taxpayers. But, they said, if the information did not reconcile, the whole process would become more complex and board may loose taxpayers' confidence.
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