The Federal Board of Revenue (FBR) is unable to trace the old manually maintained tax records of registered persons involving taxes to the tune of over Rs1 billion. This has been admitted by senior officials of the FBR before the special committee of the Public Accounts Committee (PAC) here on Monday while reviewing Audit Reports of Direct Taxes (1994-1995).
The issue came to the light when officials of the Auditor General of Pakistan (AGP) informed the committee that the tax record involved in audit paras was not available for past years and approximately record of Rs1 billion has not been submitted by the FBR for verification of audit. The committee was also surprised that some of the past tax record had been destroyed by the FBR.
About the destruction of the tax records, Additional Secretary Revenue Division Asrar Raouf said that 10-15 years old tax record was destroyed in the past as there was no audit objection or no audit observations of any department particularly Auditor General of Pakistan. The weeding out of tax record is only done in cases where the record is not required in any case of litigation in the court or audit matter. Therefore, very old record was destroyed keeping in view legal provisions of government rules and regulations. Other FBR members asserted that the Board had duly followed the weeding out procedure for destruction of tax record having no revenue impact.
Mahmood Alam Member Strategic Planning and Statistics (SP&S) FBR informed the committee that the FBR had tried its level best to search the record pertaining to 1994-95 in the field formations, but some record cannot be traced as it was very old. It is unfortunate that the record could not be traced despite all out efforts of the tax machinery. It is a very laborious task to search for the manual record, which was maintained 10-15 years ago.
However, e-filing of returns/statements and electronic maintenance of records under reforms has now changed the entire situation and now it is virtually impossible to misplace the electronically maintained record. Presenting a realistic picture behind reasons for not tracing record, FBR Member stated that one of the options available is to conduct inquiry against the officials responsible for maintaining records and fix reasonability on the concerned officers. In certain cases, some officers might have died or retired which would make the task more difficult for the tax machinery. In other cases, where the amount is not recoverable after fulfilment of all procedures of taxes, the amount has been written off. No-doubt the FBR has made concerted efforts to trace the record, but the same is not available.
The convenor of the special committee of the PAC, Mian Riaz Hussain Pirzada was surprised that the revenue collection agency like FBR is unable to collect the tax record from the field formations. If the institution like FBR is unable to trace the past record, it would not set good precedent for other government departments. Due to such cases of slow recovery process, the government is facing embarrassing situation.
FBR Member SP&S requested the committee to help them in sorting out the issue for the settlement of the audit paras. He thoroughly explained that the FBR had to depute a large number of tax officials on such task and still they are unable to trace the record. A large number of tax officials are spending whole time in this gigantic task which seemed to be not completed. It has been found that most of the units/companies involving these past cases have closed down their businesses. In other cases, such units are untraceable at their given addresses. Unfortunately, some of the tax officers have been died and others are not available due to their retirement.
An official of the Auditor General of Pakistan (AGP) stated that no doubt the audit objections are related to 1994-1995. If the FBR had timely taken the action in these cases, the situation would have been entirely different. One of the committee members stated that the FBR has not focused on indigenously developed reforms in the tax administration. If the FBR had implemented home-grown reforms, the cases like missing records might have not taken place at the first stage.
Defending FBR, Mahmood Alam further informed the committee that the reforms in the tax administration has entirely changed the situation and now there is comparatively less relevance of cases framed in past 14-15 years ago due to change from supervised clearance system to self assessment system. The tax record of 10-15 years old has been scattered across the country. It is also not possible to re-construct the tax record again. However, the reforms have entirely changed the system of maintenance of tax record. Now the FBR maintains tax records electronically. The taxpayers have to electronically file the sales tax returns and invoice summary statements.
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