KARACHI: Sales Tax / Value Added Tax (VAT) is the most significant source of tax collection in the world.
Unlike direct tax it is known as tax on consumption and involves various ways and means to avoid/evade legitimate government revenue.
Sales tax / VAT is a proportional tax on supply of goods collected by the Companies or Individuals and ultimately completely bear by the final buyer, i.e. the End Consumer. Indeed, Sales Tax / VAT is applied to the “added value”, i.e. the added value to the product or service at each stage of production or marketing, so that at the end of the economic circuit, the overall tax burden corresponds to the tax calculated on the final price paid by the end consumer.
In Pakistan the Sales Tax law & its practice has extremely been made complex by the law making / executing authorities as the various sales tax regimes or modes are in vogue simultaneously.
And now, it is full of various modes of taxes like ad-valorem Sales Tax, Extra Tax, Further Tax, Zero Rated Tax, Reduced Rated Tax, along with certain concessions / exemptions or limitations on the supply of good or class of goods or person or class of persons.
Since concessions, exemptions and collecting modes are available with various sales tax rates under the Act, 1990 and rules made thereunder, so massive evidences of mass misuse of such facilities are available on record.
Albeit, the audit is the only way in all over the world to create deterrence against such misuse and evasion of legitimate state revenue. But unfortunately in Pakistan, the Sales Tax Audit has not been given due attention instead Senor Auditors and Auditors of this fields have been appointed in the year 1998, 1999 and 2001 with the strength of approx. 335 each on the instructions of the International Monetary Fund (IMF).
The sales tax audit is purely a technical job and it can only be conducted professionally by the Senor Auditors / Auditors of this field. Although, the Board / FBR has issued Sales Tax General Order No.3 of 2004 dated 12/06/2004, wherein provides a complete details of audit procedure & its monitoring controls under Part IV of the STGO but since formation of new tire of service i.e., Inland Revenue Services, neither the audit of the taxpayers has been assigned to the Senior Auditors / Auditors nor adopted true procedure as prescribed under the said STGO.
Therefore, no such the Audit Report was ever made by the Audit Officer & approved by the concern Commissioner as required, nor uploaded any approved audit report at Tax Audit Monitoring System (TAMS) being an evidence of audit’s completion under the law.
The non-assigning of statutory audit to the Senior Auditors / Auditors is a deliberated act of the Board / FBR, as many quarters they are unwilling for continuation of audit proceedings effectively as required under the said STGO.
It is bring to the face of bureaucracy that most of the audit cases, which were selected by the Board/FBR or by the concerned Commissioner IR, have been disposed off by the ACs/DCs/ADCs without assigning & conducting sales tax audit of the record and settled by raising nominal demand through Assessment Orders for the reasons best known to them.
This bad practice is not only creating level of corruptions but also huge loss to the national exchequer.
It is also against the world wide audit & its judicial norms of practice that the person who skim / examine the sales tax record, simultaneously invoke quasi-judicial proceedings on the detected observations. So that, such practice creates conflict of interest of the Observing Officer / Assessing Officer and on the other hand mark a question of independent judgments. However before formation of IRS, there was a separate adjudication authority, who conduct adjudications on the Contravention Reports based on audit findings duly approved & forwarded by the Collector (Audit).
Basically the Inland Revenue of the FBR has not accepted the sales tax Audit Officers, who were purely appointed for sales tax purposes and migrated from Pakistan Customs Department to newly integrated system i.e., IRS. Indeed some of them have been posted at the places like Directorate of Training (DOT) where no such post / vacancy for Audit Officers is existed and in such manners Audit Officers are being wasted having nothing to do and their expertise are not being utilized.
Even in order to humiliate them, some of Inland Revenue Audit Officers (IRAO), BS-18 are posted under the junior Officer of Inland Revenue (OIR), BS-16, neither who have experienced of sales tax nor competent to execute the proceedings under the law.
The sales tax officers, especially auditors, have been discriminated badly when the seven (07) other cadres of officials were upgraded by FBR vide Notification No. 25(8) M.IV/2007 dated 21-06-2008 under the uniform up-gradation policy issued by Establishment Division’s vide O.M.No.F.8/36 / 2000-R.I, dated 20.1.2001 but they were left to seek justice through the higher courts or Apex Foras.
Although after their (Auditors) exhaustive efforts of Seven (07) years, the Board / FBR finally admitted and upgraded their post as “Senior Auditor IR, BS-16” vide Notification No. 2315-IR-III/2016 dated 08-09-2016 which concurrence was already awarded by the Establishment Division vide O.M. No.8/73/2007-R-I, dated 13-07-2010. However, the Board / FBR has misconceived that the post of Senior Auditor Inland Revenue (SAIR) has already been re-designated & up-graded as Inland Revenue Audit Officer (IRAO) BS-18 vide its Notification No. 4(2) SSM/2010(#85) dated 03-08-2010 and since no more post as Senior Auditor IR is existed under the Sales Tax Act, 1990.
However, pursuant to the re-designation & up-gradation of the post of Senior Auditor IR as Inland Revenue Audit Officer BS-18 dated 03-08-2010 coupled with the judgment passed by the Hon’ble Supreme Court of Pakistan in Civil Petitions bearing No. 325 to 397 of 2010 dated 15-03-2010 wherein it was categorically held that “Once there is a policy and some of the department have already been allowed up-gradation then there should be no discrimination to extend such benefit to the other departments of the Government, if the nature of job of such employees is similar”; both the cadres i.e., Senior Auditor Inland Revenue (SAIR) and Inland Revenue Audit Officer (IRAO) are the same being doing the similar nature of job within the department since last twenty one years.
Now contrary to the above fact, the Senior Auditors IR are being treated discriminatively within the department with the other Inland Revenue Audit Officers, in BS -16 instead of BS -18.
Besides above, the Inland Revenue Audit Officers / the Senior Auditors are the one with the accumulative strength of approx. 670, who are mainly effected with the integration of this Inland Revenue Services where no such path of promotion was ever decided / provided to them since last twenty one years. Neither the Board / FBR has bothered to decide the separate path for them nor include them in the main stream of hierarchy, even the seats allocated for sales tax officers were filed through direct inductees or from promotions of OIRs (BS-16) or Inspectors IR (now BS-16). The purpose of not including the Audit Officers in the main stream is to prevent them from unearthing tax evasions for the reasons best known to them which resulted ultimately in the shape of loss to the national exchequer.