ICAP parts ways with FBR over TAF

Amid increasing differences, Institute of Chartered Accountants of Pakistan (ICAP) has finally parted ways with Federal Board of Revenue (FBR) over the audit of 400 companies under Tax Audit Framework. The audit of some 400 companies, which was agreed to be completed by August 31, had been hanging in the balance due to a never-ending blame-game between ICAP and FBR.
President ICAP Saqib Masood told Business Recorder that financial audit under Tax Audit Framework (TAF) earned the institute a bad name. "There was a clash of interests and objectives between ICAP and FBR in relation to audit of companies," he added.
He said that FBR "forced" ICAP to identify revenue leakages. Describing the reasons behind the failure of tax audit, he said FBR randomly selected some 400 companies through balloting which was the first and the most important reason behind the failure. From the beginning, ICAP was not hopeful for fruitful result of this audit, he said.
Among 400 randomly selected companies, 150 companies declared losses while an equal number of companies were in Final Tax Regime (FTR), he maintained. According to him, around 60 companies have filed a petition in Lahore High Court (LHC), challenging the powers of the institute for conducting the audit of companies. The audit of remaining companies was declared reasonably correct, he said. The institute detected a single case of 500 million revenue leakage in Regional Tax Office, he added.
Expressing amazement over random balloting by the FBR, he said there was not a single big government, semi-government and private institution, bank in the list. Whether it was done intentionally or unintentionally, it was another debate, he argued.
He said ICAP and FBR had signed a Memorandum of Understanding (MoU) under which both parties agreed to involve third party in audit process of all major taxes including income tax under Universal Self- assessment Scheme (USAS) and the sales tax. ICAP agreed to devise a pattern for conducting tax audit, advise FBR on technical matters and assist in devising audit strategy for non-company cases. He said there were also some operational problems in conducting financial audit of companies. "Even in some cases, the letters of engagement could not be signed due to uncooperative attitude of taxpayers and tax officers," he claimed.