Audit through parametric computer ballot: FBR approves new policy for case selection

ISLAMABAD: The Federal Board of Revenue (FBR) Saturday approved the new audit policy for 2020 for income tax, sales tax, and federal excise duty (FED) for selection of cases for audit through parametric computerised balloting for the Tax Year 2019.

Sources told Business Recorder that the special Board-in-Council meeting of the FBR was held at the FBR Headquarters, here on Saturday to discuss the new audit policy.

The FBR chairman and his entire team of Members were present in the meeting.

The Board-in-Council finally approved the new audit policy for a parametric computerized balloting for the Tax Year 2019.

After the approval of the new audit policy for 2020, the FBR is expected to issue the new policy and select lower percentage of cases for audit.

Certain cases may be outsourced to the third party for audit purposes.

The new Audit Policy of the FBR may lay down a mechanism for third-party audit of willful tax defaulters, non-filers, and cases of concealment of income through chartered accountant firms.

Presently, there is no detailed mechanism available in the law for third-party audit of non-filers of income tax returns or major cases of concealment of income.

Ordinance promulgated: Non-filers of tax returns to face strict actions

The existing audit policy lacks procedure for third-party audit by the chartered accountant firms.

The major cases of concealment of income could be referred for third-party audit for which detailed mechanism/system needs to be chalked out by the tax department.

Board-in-council also discussed the initiation of the memorandum of understanding (MoU) with the Nadra.

However, the agenda was deferred till the next meeting of the Board-in-Council.

The government has given legal backing to the NADRA to compute indicative income and tax liability of any citizen by use of artificial intelligence, mathematical or statistical modeling or any other modern device or calculation method.

The powers have been extended to the Nadra through the promulgation of the Tax Laws (Third Amendment) Ordinance, 2021.

The Nadra and the FBR can enter into a MoU for a secure exchange and utilisation of a person’s information.

The board-in-council meeting also discussed the mechanism for distribution of prize money for customers of Tier-1 integrated retailers.

Willful tax defaulters, non-filers: New policy to lay down third-party audit mechanism

The FBR with the approval of the federal minister-in-charge levied service charges at a rate of rupee one per invoice issued through all points of sale (POSs) integrated with the board’s computerised system for the real time reporting of sales, which shall be collected by Tier-1 retailers integrated with the board’s computerised system and deposited in a designated account along with monthly payment of sales tax and filing of the sales tax return.

The FBR’s members also discussed the issue of approval for amendments in the Inland Revenue Reward Rules 2021 notified vide SRO 78(1)/2021. Under the new amendment, the FBR Member (Inland Revenue) Operations would be the sanctioning authority for all cases involving detection and recovery of the unpaid or evaded amount of tax.

The maximum and minimum amount of reward for employees shall also be revised.

The establishment of the new directorates of intelligence and investigation Inland Revenue stationed at Quetta, Abbottabad and Gujranwala were also proposed.

However, some FBR Members were of the view that the creation of the new directorates would put extra burden on the existing pool of the officials and staff, and pulling out officers from the field for the creation of the new directorate would adversely impact the broadening the tax base.

Copyright Business Recorder, 2021