The Central Board of Revenue (CBR) has informed the World Bank (WB) that there is a shortage of trained auditors in the field formations, as they mostly prefer postings at the Regional Tax Offices (RTOs) for getting double pay package.
Sources told Business Recorder on Friday that a WB mission comprising Anjum Ahmed and Shamsuddin Ahmed visited CBR House to review the tax administration reform project. The mission individually met CBR members for obtaining update on various ongoing reform projects.
The board has informed the WB that the manpower requirement is the major issue for carrying out proper audit of the registered companies. Presently, rollout of RTOs is underway for which selection of officers is being done for extending double pay packages. The audit staff has also applied for the RTOs to obtain double pay package on specialised positions. As a result of this exercise, many auditors have been transferred to RTOs, which may create shortage of staff during the current exercise. Secondly, the auditors are also facing logistic problems like transport etc, which need to be improved on top priority basis.
About the pace of audit, the WB officials expressed satisfaction over the existing audit strategy being applied at the Large Taxpayer Units. The audit of LTU Lahore has been started and LTU, Karachi has finalised all preparations for starting the audit.
The WB mission was also informed about the criteria applied for selection of cases for audit. The international audit expert gave a demonstration of the selection criteria to the WB officials.
During demonstration, audit expert pointed out that 16 selection criterion have been applied for selecting cases for audit. In this regard, an automated system has been adopted to conduct audit. The criteria provide a systematic means to select cases for audit, maintain audit results and analyse them.
It was informed that the CBR has chalked out industry profiles of different sectors for effective audit. The sectors are automobile, cement, cigarette, fertiliser, sugar, telecom, cash business and others.
The board also presented samples of case selection process before the WB officials. For example, the potential criteria may include the following: First, inventory/stock, closing balance of one year does not match with the opening balance of the subsequent year. Secondly, total sales on income tax return are different from the total sales on sales tax returns for the same period. Thirdly, total sales on income tax returns exceed the total sales on sales tax return. Fourthly, total sales tax on the sales tax returns exceeds total sales on income tax returns. Fifthly, export sales on income tax return/zero-rated sales on the sales tax returns and value of export in the customs database do not match.
Sources said that common compliance problems by the taxpayers include failure to maintain proper books and records; understatement of income, overstatement of expenses; failure to ascertain actual closing stock and failure to report income from other sources.