The Federal Board of Revenue has decided to issue new parameters for composite audit of sales tax and income tax of registered units. Sources told Business Recorder on Tuesday that the audit parameters have been duly reviewed taking into account provisions of the Income Tax Ordinance 2001 and Sales Tax Act 1990. The legal framework available under these laws has been thoroughly examined for issuance of such parameters.
According to sources, the joint audit by sales tax and income tax would be conducted on the basis of parameters for which an exercise is underway. The audit parameters would help the field formations in effective audit of cases. Presently, tax officials are empowered to conduct audit under section 177 of the Income Tax Ordinance 2001 and section 25 and 38 of the Sales Tax Act 1990.
Sources said that audit could be used as an effective tool for detection of unpaid amount of taxes. The accurate audits would be instrumental in detection of huge amount of taxes. For example, the desk-audit of income tax returns has helped in creation of income tax demands of over Rs 80 billion in 2007-2008, resulting in recovery of Rs 37 billion. This showed that the taxpayers have avoided tax to the tune of Rs 80 billion in 2007-2008. The actual potential of detections through audit is much higher than the past performance of auditors. However, composite audit based on effective parameters could result in recovery of the unpaid amount.
The Board has planned to select corporate units and business entities of top sectors for combined audit of sales tax and income tax. Sources said that the FBR is making efforts to increase the overall coverage of audit. The data sharing and verification of information from third party has opened new avenues for detection through audit. It would ultimately improve detections made through this exercise. The FBR has given top priority to the training of auditors in a professional manner.