The Collectors of sales tax and federal excise are empowered to conduct audit of registered persons as per national audit plan guidelines. Sources told Business Recorder on Monday that it is mandatory for collectors to carry out audit of different categories of taxpayers.
The national audit plan (NAP) has been dispatched to the Directors-General of Large Taxpayer Units and Regional Tax Offices (RTOs). The audit commissioners and collectors are bound to conduct the audit under the relevant law.
Sources said that there was no need to withdraw a letter of 2004 pertaining to suspension of field audit. If any collector has raised objection for the withdrawal of letter-2004, it has no justification. The board has launched comprehensive audit of large and medium taxpayers units across the country.
The letter-2004 was issued to the field formations for suspension of audit. There is no legal requirement to specifically rescind the letter. The field formations are actively pursuing the audit plan in view of board''s directives issued from time to time.Sources said that the board is daily interacting with the field formations on audit progress.
The so-called withdrawal of 2004-letter has no legal backing, but board can issue another letter to the field formation on resumption of audit for record purposes. It is worth mentioning that the FBR Member Sales Tax had recently pointed out during a meeting that a collector had objected about not receiving letter on the withdrawal of audit.
Under the national audit plan, the board had laid down ''auditing standards'' for the auditors to judge their performance during field audit of large and medium taxpayers. Along with the gradual resumption of taxpayer''s audit countrywide, the FBR would develop a process to ensure uniformity of interpretation and application of the law.
Sources said that the set of predetermined standards would be instrumental in checking whether the auditors have met required standards. The newly devised plan has projected at least 5-10 percent income tax and 20-25 percent sales tax audit coverage in each of the potential sectors particularly retail in 2007-08.
According to the NAP, the FBR would focus on audit of retail sector. Since the overall returns filing and tax payments for this category is very low against the number of business establishments and retail outlets operating in Pakistan, appropriate resources will be applied to better assess the overall compliance issues of this sector.
The board would randomly select relatively small number of sales tax returns. Through analysis of returns, tax recoveries from sample selection, efforts will be made to project the potential tax recoveries for the whole group. By periodically checking non-compliance by a particular group of taxpayers, in relation to audit activities within that group, an attempt will be made to estimate the effects of audit on compliance.
The increased or decreased number of audits depends upon the level of compliance in that particular taxpayer group, sources said. Under the plan, the FBR will focus on eight key areas including audit workforce management, expand community outreach, acquisition of appropriate audit support tools, identification/conduct of most productive cases, enhance knowledge management capacities, development of integrated tax system, identification of quality measurement standards and development of key performance indicators.