The Federal Board of Revenue is planning to equip the Inland Revenue Services (IRS) management with an integrated domestic taxes technology using state of the art system ie System Transparent Analysis of Inland Revenue (Stair) for checking huge gap in income tax, withholding statements and sales tax returns.
Sources told Business Recorder on Tuesday that the Stair has been drafted by Shafqat Mehmood, Commissioner Inland Revenue Lahore with the help of technology provided by technical experts from University of California and Florida Institute of Technology without taking any cost from expatriate Pakistanis.
The Stair would be equipped with the necessary data to check fraudulent input tax adjustments and huge gaps in income tax and sales tax under the IRS regime to increase revenue collection to billions. During a recent presentation on the Stair, Shafqat pointed out that in the electronic data of income tax, withholding statements does not contain information about the persons from whom tax has been deducted.
This information is available in purchase invoice summary of sales tax returns, but does not contain in withholding statements. He explained that if we exclude those withholding agents who have obtained exemption certificates as manufacturers, then the department can easily determine the net liability, which the withholding agents have to make payments.
He further explained that the on sales tax side the suppression is on purchases just to get fraudulent input tax adjustment. In the withholding statement of income tax, withholding agents suppress the information relating to sales to conceal the deduction made on sales.
In this meeting on Stair, Mehmood gave a presentation on the integration of sales tax and income tax data to FBR Chairman Sohail Ahmed and concerned FBR members and Pakistan Revenue Automation Limited (Pral). It was pointed out that presently there does not exist linkages between different data that FBR maintains. Consequently, electronic information available is not being put to proper use for plugging the evasion of taxes. The FBR Chairman also took the notice of the fact that field formations are not using the available information for increasing revenue by focusing on discrepancies and possible short/ non-filing.
Keeping in view the benefits of the Stair, FBR Chairman highly appreciated the system and constituted a committee that inter-alia shall perform the following functions: It will examine all the existing IT applications & shall point out any duplicity existing in the system.
Secondly, it will examine the scope of Stair and its capacity in plugging the evasion and generating extra revenue. The committee will examine the technical requirements of Stair and work out the modalities for its implementation provided it is found a sound integrated system.
The committee will also workout effective monitoring of the system that it will propose. The committee will submit its findings to Board-in-Council within one month. The committee comprises Asrar Raouf, Member (DT-Policy and Operations South); Khalid Aziz Banth, Member (Operations North); Abrar Ahmad, Member (Sales Tax); Shafqat Mehmud, Commissioner IR (Secretary); Zafar Iqbal, DG, IMS and Imtiaz Ahmed Khan, General Manager, Pral.
Sources said that presently there are different problems in linkage of different data of taxpayers. For example, income tax business processes are manual, income tax information of withheldees not available and income tax exemption certificate and refund payment made through manual verification.
Other barriers in data linkage included that the income tax refund easier than sales tax refunds as verification of tax is only of refund claimant but in sales tax it involves series of stages for verification. The imports declared in income tax not verified by GDs imports and no stair available that connects these data.
The potential of revenue yield from Stair is evident from the fact that it would promptly check withholding agents through sales tax purchase invoice summary, electronic verification of exemption certificate will clearly establish the liability of withholding agents.
After correction of UNO commodity codes, weighted average rate of gross profit and net profit will help to check the liability of taxpayer and aligning of the RTOs on sectoral bases will help to detect the under reported amount of payable tax (income tax and sales tax).
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