The comparative analysis of latest withholding income tax statements and sales tax returns data through Computerised Risk-Based Evaluation of Sales Tax (Crest) has detected a huge gap between the declarations made in statements and returns.
Sources told Business Recorder here on Saturday that the CREST is designed by the Federal Board of Revenue (FBR) to carry out risk-based analysis of different sectors for plugging the leakages. Within the jurisdiction of Regional Tax Office (RTO), Lahore, the scope of CREST has been broadened integrating income tax related information with the sales tax data.
The analysis of 2010 showed there were around 3000 withholding agents who are not filing withholding returns but have filed their monthly sales tax returns. In one of the study it has been found that in these cases purchases showed cost Rs 48067 million. It is interesting to note that on such huge purchases no withholding statements have been filed. This clearly indicates that withholding taxes on these purchases have apparently been not deducted.
When asked, experts admitted that these are huge gap except in cases where buyers might have obtained exemption certificates. However, this needs thorough analysis of data for which RTO is comparing the withholding statements with the sales tax returns.
In around 800 cases, it has been found that purchases shown on sales tax returns were of around Rs 141 billion whereas on the income tax withholding returns these were only worth Rs 22 billion. Even taxpayers have obtained exemption certificates, but the tax gap is still very large, which requires further analysis by the RTO.
It is interesting to note that CREST has also pointed out that on withholding side the purchases were of around Rs 11 billion whereas for the same period sales tax returns showed only Rs 31 billion. Another finding is that in around 500 cases, sales tax purchases are Rs 138 billion but these persons have declared only the purchases of Rs 11 billion.
Sources said that CREST has taken a lot of care while tallying the information of withholding statement with sales tax returns. The RTO team is working to actually watch the extent of the tax evasion. It is, further learnt that the RTO is developing electronic resolutions so that no unnecessary hassle is created for the taxpayers.
It is also being ensured that tax officials do not use this data only for harassment purpose. In any case, there is startling difference between information provided by the taxpayer in the sales tax returns and in the withholding returns. Efforts are also underway to compare the annual income tax returns with the sales tax returns.
It may be added that this exercise is limited only to areas where the information is being captured electronically. This exercise will help the compliant taxpayer and will make them competitive with other non-compliant taxpayers once the evaded amount is recovered. They also hoped that when the CREST is fully functional it would be difficult for the taxpayer to make wrong declarations.