The CBR has started a detailed comparative analysis of the audit policy of Pakistan with the audit systems applicable in neighbouring countries for finalisation of the new system before the end of six months audit suspension period.
The new sales tax audit policy will cover all important aspects including selection criteria, audit monitoring, reporting, management, audit approvals and particular focus on training of auditors.
By the end of March, the preliminary decision pertaining to new policy would be taken by tax authorities for implementation in future. As soon as the new audit policy is finalised, the CBR will start training he auditors.
When asked whether the audit systems applicable in advance countries would be applicable in Pakistan, sources said that CBR has adopted self-assessment regime in all taxes as applicable in modern countries. For example, CARE Project will be a major step in self-assessment on the customs side. If the CBR can adopt modern countries' self-assessment regimes, then there is no harm in adopting their audit polices as well, provided that the audit policy is made practicable with the domestic laws.
A tax consultant opined that the tax authorities should also examine audit systems applicable in UK, Australia, New Zealand and South Africa where compliance level is very high and audit policies are much better with reference to enforcement and detection.
The tax modules of these countries are based on five pillars relating to key issues pertaining to audit.
First, coverage of audit (ie what percentage of taxpayers' should be audited).
Second, methods of conducting audit (what type of audit should be performed ie issue-oriented audit, comprehensive audit, tax fraud investigation or routine refund audit).
Third, the selection criteria of audit (how cases should be identified).
Fourth, staffing and training (what are the staff resources available to conduct the audit program and the type of training they need).
Fifth key pillar is monitoring, information management system need to monitor the audit program (ie assigning targets, developing time standards, performing quality review and ensuring prompt collection of additional revenue from such audit).
The international standard for carrying out audit is that such audit program should provide for 25-30 percent coverage of taxpayers each year.
Tax consultant added that the VAT mode system is not applicable in India. Singapore and Indonesia are following the theoretical possibility of cross-checking of purchases and sale invoices to promote compliance.