A top tax lawyer has raised 10 major issues in the proposed National Audit Plan (2012-13) of the Federal Board of Revenue with the suggestion of public disclosure of parameters for selection of audit cases for Tax Year 2011. After thoroughly examining the proposed plan, Syed Naved Andrabi,
Advocate Supreme Court here on Wednesday drafted his comments on the National Audit Plan (2012-13) which needs modification. Some issues have been raised taking into account the new strategy of audit specified in the proposed National Audit Plan (2012-13). The Federal Board of Revenue is in the process of finalising the audit plan for issuance to the field formations.
Sharing his comments on Audit Plan (2012-13), leading tax lawyer told this scribe here on Wednesday that the parameters of selection of cases of audit should be made public to all before filing of the returns and not after the their filling. Secondly, the percentage of selection of cases should not be more than 5 percent as the FBR has already audited the leading and major taxpayers.
Thirdly, the risk base audit should not be entwined with other taxes for the system of e-filing as documentation is not in place; which will lead to discrepancies. Fourthly, the e-filing system is being made cumbersome in the garb of documentation which again is a discouragement for those who are in the tax net.
Fifthly, the economy is on a decline which is being reflected from officially and unofficially released data on regular basis. The brunt is being faced by the common man; then how can decline in sales and gross profit (GP) or net profit (NP) can be made the basis? Due to slowdown in economy, the GP rates or NP rates are natural phenomena to show decrease. This should not be made basis for the selection of cases for audit. The cost of doing business has also been increased which would result in lower GP rates. In current economic circumstances, how such GP rates or NP rates could be formed basis for selection of cases for audit.
Sixthly, the basis of selection should be on definite expenses made which are more than the income declared or reconciled. Seventh, the transactions of purchases not shown by a taxpayer or a business house should be the basis for audit. Eighth, the conditions on adjustment of input are being laid which would result in Refund; similarly multiple withholding provisions also result in to Refunds. During selection of cases for audit, the refunds can not be made the basis of audit.
The refund could arise due to different reasons and solely increase in refund claims should not be considered as basis for selection of cases for audit. Ninth, when the law provides different rates of tax under the sales tax then how these rates can be made the basis for selection for Audit?
Tenth, the discrepancies identified by STARR computer system; Pakistan Revenue Automation Limited (Pral) or any other internal system can only be made basis if the data entry is authentic and accurate. So far no system adopted by FBR is fully compliant and authentic, Naved Andrabi stated.
He added that the Audit Plan for Tax Year 2011 is being discussed at the time when the returns for Tax Year 2012 are filed. It is prime time to discuss the audit plan for Tax Year 2012 instead of Tax Year 2011 as this will be in line with various judgements of High Courts and Supreme Court on the issue of audit. Large Taxpayer's Units, particularly Karachi has already audited all the prominent taxpayers for the Tax Year 2011.
Moreover, the comments are being sought from the field formations and no tax bar or chamber or trade body has been contacted or taken into confidence. The question arises why are the parameters being kept secret? The Board has decided to select cases of income tax, sales tax and federal excise duty for audit under new Annual Audit Plan (2012-13) through computerised balloting on the basis of risk parameters.