Irfan Nadeem, Member, Direct Taxes, Federal Board of Revenue (FBR), has assured the members of business community that they should not be apprehensive of audits, as these would be undertaken only "where we have complete information as to the need for audit".
During his visit to Site Association of Industry (SAI) here last week, he said that complete transparency would be maintained to ensure that confidence in audit is not shaken, and the system is happily accepted. The CBR Member was accompanied by Asrar Raouf, Director-General, RTO, Karachi.
According to details available here on Monday, the issue was raised by SAI Chairman M A Jabbar at the meeting. He said: that "selective and random audit is acceptable," but it was necessary to select the audits on the basis of parameters for selection. Further, the parameters for audits for different economic activities in terms of different industrial sectors have to be undertaken.
This would require improvement in the database so that taxpayers know that crossing of the red light is a violation and could be penalised. With the establishment of criteria for selection of audit, the discretionary powers would also be diluted which has remained a long overdue pending demand of taxpayers.
Jabbar said that the discussion related to transparency in selection of audit has remained alive all the time. Even Federal Tax Ombudsman (FTO) of the repute of former Justice Saleem Akhtar always held the view that parameters of the selection of audit case in case of direct taxes should be made public and notified for conducting transparent audit.
This would eliminate the claim by the taxpayers on subjecting them to discretion, maladministration or harassment. He said that FBR office may also consider that the parameters of audits for different economic activities and different industrial activities may also be developed in consultation with stakeholders so that more compliance and least violations are ensured in the national interest for smooth conducting the growth of economy.
The SAI Chairman suggested extra care in the ongoing reported go for audits by Direct Taxes Wing through LTUs and RTOs in the given situation when "all of us know that we are sailing in the economic crisis plagued situation". The holding of audits be delayed till such time parameters for selection and parameters for audit for different industrial activities and different economic activities are developed.
Prevention is better than cure may be applied for moving the economy without conflicts and contradictions. One of the important issues brought before the FBR Member was selling of undocumented material in black. Razaque Steel had pointed out that at present Pakistan Steel deducts 10 percent as withholding tax from authorised dealers of Pakistan Steel from the commission they give to their dealers.
However, these dealers do not wish to deal with limited companies, and limited companies also cannot deal with these dealers because they have to deduct 3.5 percent withholding tax, which these dealers refuse. This results in materials being sold undocumented in black and the tax authorities by their own policies are encouraging traders to sell in black. The dealers cannot afford 3.5 percent deduction.
It was suggested to FBR Member that 10 percent withholding tax deducted by Pakistan Steel from commission should be their final liability and they should get a certificate to that effect which they can give to the limited company so that payment could be made to the dealers without deduction of withholding tax by the limited company.
If this is not done, it would encourage the dealers to sell without invoice and make full transaction outside the tax net. The FBR Member suggested that Razaque Steel should try to help FBR in documentation as concessions and relaxation in no way would result in an increase in documentation.