Sales tax internal audit suspension termed meaningless

16 Mar, 2006

Suspension of sales tax internal audit is serving no purpose, as the Directorate General of Intelligence and Investigation (I&I), Customs and Excise has again started audit of a large number registered units putting aside redefined role of these agencies under the reform process.
Official sources told Business Recorder on Wednesday that the Directorate General of Inspection and Internal Audit, Customs and Excise has even issued notices to the taxpayers to submit sales tax record for audit, which has caused harassment among taxpayers.
It is strange to note that while sales tax audit is suspended, the Board's both Investigation Wings have started probing taxpayers' record, sources said.
Moreover, the directorate has sought assistance of tax auditors from the Board to complete the audit proceedings.
Giving details an official said that the CBR had suspended sales tax internal audit for the last one year on the complaints of harassment by its auditors. But once again the directorate wants to conduct audit with the help of the auditors suspended earlier, which clearly reflects inability of the agency to complete the assigned task.
Secondly, the CBR has promised the taxpayers only one audit per annum, whereas the directorate's notices altogether have negated the Board's policy on this sensitive issue. It is the job of the Sales Tax Wing to conduct audit instead of the directorate.
The Board has only authorised the directorate to examine sales tax record of a few units. The directorate has transgressed its powers in carrying out audit of a number of taxpayers, whereas the Board has only permitted audit in a few cases.
"If the superintendents, deputy superintendents and inspectors of the directorate are competent in conducting audit, then is there any justification for these officials to examine the tax record? Without proper knowledge of latest audit techniques and the Sales Tax Act, 1990, the directorate's audit initiative would only result in harassment of the business community", sources added.
Officials said that the on-going exercise of the directorate was against the reform process, as there is no room for enforcement under the new organisational structure of the DG, Intelligence and Investigation. Under the new role, the agency should only work as an information collecting body, but officials having no basic knowledge of audit are doing the job just to extort money from the taxpayers, they added.
The redefined role of the directorate is to draft anti-smuggling policy and give suggestions instead of carrying out audit of the registered businessmen. Under the reforms, the directorate would not operate as an enforcement agency, but only gather intelligence-related information for the Board.
Meanwhile, tax experts said that suspension of sales tax audit was a failure on the part of the Board. The CBR has neither resumed audit nor is ready to give this power to any other agency. The audit acts as a major deterrent under the self-assessment regime. However, suspension of audit has given a free hand to the taxpayers to declare whatever they like. The audit would not resume till the appointment of new Member Audit, who would be given assignment to devise a new audit policy.
They said that the directorate is not empowered to conduct sales tax audit of the registered taxpayers, whereas, it has issued notices to the registered units demanding tax records in the garb of inquiry. The directorate should have given prior reasons for examination of the tax record to satisfy the taxpayers.

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