Sources said on Monday that the Board-in-Council has directed CBR Member, Audit, to devise a broad-based national plan to conduct audit of taxpayers registered with the sales tax and income tax departments. It has also been decided to hire services of an internationally reputed consultant to assist the CBR in devising the audit policy.
The Board-in-Council also agreed to systematically restore field audit on the basis of the new plan. However, the Council did not specify any timeframe for the resumption of sales tax audit.
Interestingly, the CBR has taken the decision to prepare 'national plan' at a time when training of auditors has been completed in Lahore to implement the current 'audit policy'.
Sources said that there were several reasons for bringing changes in the policy devised by the CBR Audit Wing.
First, 'audit plan' would be finalised taking into account a number of changes in the taxation system in the 2005-06 budget. Particularly, zero-rating of five sectors and other legal changes in the sales tax regime require a revised audit policy. The current policy was formulated on the basis of last year's data of taxpayers, whereas the earlier policy became irrelevant in the presence of amendments made in the budget. The new plan would incorporate all the necessary changes announced for 2005-06.
They said that the CBR has completed desk-audit of different sectors including commercial importers, customs house agents, retailers and steel melters. This was done without visiting the business premises of these taxpayers on the basis of available record. Thus, desk-audit is in full swing despite the fact that internal audit is suspended.
Income tax department also opined that desk-audit is being carried out without interaction with the taxpayers.
Officials said that the World Bank (WB) has also desired resumption of both sales tax and income tax audit. The message that deterrent is there in the existing audit system must reach the taxpayers.
Tax experts said that CBR Audit Wing's only job was to formulate a new audit policy, and sales tax audit was suspended for the last many months. On the income tax side, no case was selected for carrying out audit under the Universal Self-Assessment Scheme (USAS) for tax year '2004'. Audit Wing's only achievement was drafting the 'new audit policy', which is now being rejected by different quarters. What is the justification of spending three years in devising a policy, if it is to be replaced by another plan? they said.