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Tag: audit

  • FBR to target large taxpayers for detailed field audit

    FBR to target large taxpayers for detailed field audit

    ISLAMABAD: Federal Board of Revenue (FBR) to conduct tax audits of large taxpayers, who are selected through an automated risk-based tool.

    According to World Bank’s updated report on ‘Pakistan Revenue Mobilization’ said that according disbursement linked Indicators (DLI) the FBR required to conduct tax audits on cases selected through an automated risk-based tool, informed by analysis of integrated data from multiple sources.

    It sets targets for detailed field audits of large taxpayers, thereby making an efficient use of resources for the highest impact.

    Riskbased audit is essential to deterring tax evasion and increasing compliance, especially for large taxpayers who use complex tax evasion techniques.

    It also benefits compliant taxpayers, as it spares them the hassle and cost of ineffective mass audits and reduces the discretion of FBR officials to pick cases for audit.

    The World Bank program also required the FBR to implement—through licensed agents—electronic production monitoring for high-risk sectors (e.g., sugar, cement, fertilizer) and electronic tracking of production, distribution, and sale of final products (tobacco, beverages).

    It will increase compliance by reducing the risk of under-declaration of output, sales, and corporate profits, the report said.

    The DLI related to new taxpayers with taxable incomes/sales identified through automated data sharing and ICT-based BI

    (number)will ensures that the FBR will use the new ICT equipment and software that enables the BI and data mining tools to identify unregistered or noncompliant taxpayers.

    It also disincentivizes the registration of individuals and firms without taxable income or sales, thereby avoiding inefficient use of FBR resources and negative impacts on micro firms and economically weaker households.

  • Sales Tax Act 1990: FBR may appoint special panels for audit

    Sales Tax Act 1990: FBR may appoint special panels for audit

    KARACHI: Federal Board of Revenue (FBR) has been empowered under sales tax law to appoint special audit panels for conducting audit of any registered person.

    The updated Sales Tax Act, 1990 issued by the FBR, the Section 32A explains the powers of the revenue body for appointment of special audit panels.

    Section 32A: Audit by Special Audit Panels

    Sub-Section (1): The Board may appoint as many special audit panels as may be necessary, comprising two or more members from the following, –

    (a) an officer or officers of Inland Revenue;

    (b) a firm of chartered accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961);

    (b) a firm of cost and management accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966); or

    (d) any other person as directed by the Board,

    to conduct audit of a registered person or persons, including audit of refund claims and forensic audit and the scope of such audit shall be determined by the Board or the Commissioner Inland Revenue on a case-to-case basis. In addition, the Board may, where it considers appropriate, also get such audit conducted jointly with similar audits being conducted by provincial administrations of sales tax on services.

    Sub-Section (2): Notwithstanding that records of a registered person have been audited by an officer appointed under section 30, the Board or a Commissioner may direct special audit panel appointed under sub-section (1) to audit the records of any registered person.

    Sub-Section (3): Every member of special audit panel appointed under sub-section (1), shall have the powers of an officer of Inland Revenue under sections 25, 37 and 38.

    Sub-Section (4): Each special audit panel shall be headed by a chairman who shall be an officer of Inland Revenue.

    Sub-Section (5): If any one member of the special audit panel, other than the chairman, is absent from conducting an audit, the proceedings of the audit may continue and the audit conducted by the special audit panel shall not be invalid or be called in question merely on the ground of such absence.

    Sub-Section (6): The Board may prescribe rules in respect of constitution, procedure and working of special audit panel.

  • Sales Tax Act 1990: tax officials authorized to access record

    Sales Tax Act 1990: tax officials authorized to access record

    KARACHI: The sales tax law has authorized tax officials to access record maintain by registered persons for the purpose of investigation and audit.

    According to updated Sales Tax Act, 1990 issued by the Federal Board of Revenue (FBR), the Section 25 explained maintenance of record by taxpayer and authority of tax department to access the record and conduct audit.

    Section 25: Access to record, documents, etc.

    Sub-Section (1): A person who is required to maintain any record or documents under this Act or any other law shall, as and when required by Commissioner, produce record or documents which are in his possession or control or in the possession or control of his agent; and where such record or documents have been kept on electronic data, he shall allow access to the officer of Inland Revenue authorized by the Commissioner and use of any machine on which such data is kept.

    Sub-Section (2): The officer of Inland Revenue authorized by the Commissioner, on the basis of the record, obtained under sub-section (1), may, once in a year, conduct audit:

    Provided that in case the Commissioner has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, he may authorize an officer of Inland Revenue, not below the rank of Assistant Commissioner, to conduct an inquiry or investigation under section 38:

    Provided further that nothing in this sub-section, shall bar the officer of Inland Revenue from conducting audit of the records of the registered person if the same were earlier audited by the office of the Auditor-General of Pakistan:

    Provided also that audit under this section shall be conducted only once in every three years.

    Sub-Section (3): After completion of Audit under this section or any other provision of this Act, the officer of Inland Revenue may, after obtaining the registered person’s explanation on all the issues raised in the audit shall pass an order under section (11).

    Sub-Section (4): Omitted

    Sub-Section (5): Notwithstanding the penalties prescribed in section 33, if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge voluntarily, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him:

    Provided if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge during the audit, or at any time before issuance of show cause notice he may deposit the evaded amount of tax, default surcharge under section 34, and twenty five per cent of the penalty payable under section 33:

    Provided further that if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge after issuance of show cause notice, he shall deposit the evaded amount of tax, default surcharge under section 34, and full amount of the penalty payable under section 33 and thereafter, the show cause notice, shall stand abated.

    Explanation.– For the purpose of sections 25, 38, 38A, 38B and 45A and for removal of doubt, it is declared that the powers of the Board, Commissioner or officer of Inland Revenue under these sections are independent of the powers of the Board under section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or Officer of Inland revenue to have access to premises, stocks, accounts, records, etc. under these sections or to conduct audit under these sections.

  • AGP asked to conduct special audit of DRAP

    AGP asked to conduct special audit of DRAP

    ISLAMABAD: Auditor General of Pakistan (AGP) has been asked to conduct special audit of Drug Regulatory Authority of Pakistan (DRAP) for past five fiscal years.

    On the directives of Aamer Mehmood Kiani, Federal Minister for National Health Services, the health ministry had written a letter to AGP and requested to conduct the special audit of DRAP for the fiscal years 2012-2013 to 2017-2018, a statement said on Saturday.

    According to letter DRAP was established through DRAP Act promulgated on November 13, 2012.

    The Authority is mandated to regulate Allopathic, Homoeopathic, Unani and Herbal drugs, medical devices, medicated cosmetics etc.

    In view of its role that has a direct impact on the health and wellbeing of the people, the authority remains a subject of public scrutiny.

    DRAP receives continued media attention alleging irregularities and malpractices regarding diverse areas being dealt by the authority as per its mandate.

    It goes without saying that transparency and efficiency in functioning of the organization is of critical importance to meet the targets and ensure sustained availability of quality medicines to the masses.

    In view of the foregoing, to further instill public confidence in the authority, it is requested to conduct a Special Audit of DRAP for the period 2012-2013 to-date of the Pricing Mechanism to ascertain whether prices of drugs are determined justly, in accordance with the laid down policy and as per law.

  • Accountability framework for FBR officials suggested to make tax audit transparent

    Accountability framework for FBR officials suggested to make tax audit transparent

    KARACHI: Pakistan Tax Bar Association (PTBA) has said that there should be accountability framework for tax officers in order to make audit transparent.

    Abdul Qadir Memon, President, PTBA in a message to PTBA Tax Journal outlined eight-point recommendations to tax authorities for making audit system more transparent in order to boost confidence of taxpayers on the authorities.

    Memon said that the accountability framework and service standards should be introduced for the employees of Federal Board of Revenue (FBR), more particularly for the revenue officers in respect of quality of assessment order and standing of their orders in the test of appeal including but not limited to final revenue generated by the exchequer.

    The PTBA said that laws should be formulated in such a manner that there is a clarity, certainty and finality of an assessment, which has been universally recognized as hallmark of audit and an assessment.

    Following are suggestions for effective audit selection mechanism and amendment of assessment based on cogent, honest, justifiable with reasoning and intelligible nexus with the tax affairs of the taxpayers and capacity to pay tax:

    — To place sophisticated tax intelligence system to gather data from withholding collection of taxes and third party information collected on the basis of transactions conducted through computerized national identity cards (CNICs).

    — Cases are selected by the FBR only on the basis of defined risk areas or red flags trigger tax audit. The field forces are restricted to conduct audit of only such cases.

    — The amendment of assessment is framed by the field forces under the following circumstances guided the rules of justice, equity and judicial conscious:

    i. Any income chargeable to tax or sales has escaped assessment, under assessed, assessed at low rate or has been misclassified on the basis of definite information.

    ii. The deemed assessment is erroneous in so far as it is prejudicial to the interest of revenue.

    — In line with global practice (USA, UK, New Zealand, Australia, Canada) to provide a more supportive legislative and administrative environment for existing self-assessment arrangements and to make the taxation system fairer and more certain, it is imperative that a system of Binding Public and Private Ruling for Resident and Non-Residents be introduced.

    — The commissioner should not be empowered to amend the assessment as many times as may be necessary on the same issue or point, which has already been subject matter of reassessment or further assessment proceedings.

    — The time limit for amendment of assessment should be reduced to two years from the end of the financial years in which the commissioner has issued the original order to the taxpayer and one year in case of amended assessment; whichever is later.

    — Relevant laws under the provisions of Direct and Indirect Taxes should be amended in a manner that:

    i. Once the audit for any tax year is conducted/completed under Section 177 read with Section 214C of Income Tax Ordinance, 2001; there should not be any audit of monitoring of withholding/collection of taxes and amendment of assessment unless ‘definite information’ comes into the possession of the commissioner.

    ii. Once the sales tax audit for any year is conducted in respect of registered taxpayer under the Section 72B there should not be audit under Section 25 of the Sales Tax Act, 1990.

  • Increase in refund claims by registered persons selected for audit

    Increase in refund claims by registered persons selected for audit

    KARACHI: Federal Board of Revenue (FBR) has selected sales tax audit of those sales tax registered persons whose refund claims increased in a month over the corresponding month last year.

    According to risk parameters for selection of audit under Audit Policy 2018, the FBR selected audit cases through computerized balloting of those registered persons whose refund claim increase during a month over the corresponding month last year.

    The FBR also randomly selected those cases where decline in value of supplies as compared to corresponding months of previous year.

    Besides consistent increase in input tax/output tax ratio over corresponding months of previous three years were also selected through random balloting.

    Other risk parameters are included:

    Decrease in taxable supplies to total supplies ratio as compared to corresponding months of previous year.

    Difference in declared value of sales as compared to declared turnover in Income Tax Return.

    Persons declaring reduced rate sales.

    Manufactures showing inadequate value addition.

    Declared sales are less than imports

    Decrease in payment of tax as compared to corresponding months of previous year.

    Increase in refund claimed as compared to corresponding months of previous year.

    Unclaimed purchase to declared purchases ratio is high.

    Utilities to sales ratio is high.

    Discrepancy identified by CREST.

  • FBR excludes salary persons from audit selection

    FBR excludes salary persons from audit selection

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday issued Audit Policy 2018 and excluded salary persons from selection of audit.

    The following exclusions have been identified and approved by the Board under relevant rules where selection for audit by the Board is not required.

    Income Tax

    i. All cases already selected for audit by the Commissioners Inland Revenue or Director I&I (IR) under section 177 of the Income Tax Ordinance for any of the preceding three Tax Years i.e 2014, 2015, 2016

    ii. All cases already selected for audit under section 214D of the Income Tax Ordinance, 2001, for any of the preceding three Tax Years i.e 2014, 2015, 2016

    iii. All cases where income chargeable to tax under the head salary exceeds 50% of taxable income, except cases having business income. Directors of companies do not qualify for this exclusion.

    iv. All cases where entire income is covered under Final Tax Regime (FTR)

    Sales Tax

    All cases already selected under section 25 and 38 of Sales Tax Act, 1990 by the Commissioner Inland Revenue or Director I&I (IR) for tax periods corresponding to the accounting period adopted for the purpose of return of income under the Income Tax Ordinance, 2001 for Tax Year 2016

    Provided that where only a part of the said accounting period had been audited already, the relevant authority may select the remaining period for audit.

    ii. All cases already selected for audit under section 72B through computer ballot held under Taxpayers’ Audit Policy, 2017

    iii. All cases of Steel Melters and Steel Re-rollers who are paying sales tax under the Sales Tax Special Procedure Rules, 2007.

    iv. Federal, Provincial and Local Government Departments.

    Federal Excise

    i. All cases already selected under section 46 of the Federal Excise Act, 2005 by the Commissioner Inland Revenue or Director I&I (IR) for tax periods corresponding to the accounting period adopted for the purpose of return of income under the Income Tax Ordinance, 2001 for tax year 2016.

    Provided that where only a part of the said accounting period had been audited already, the relevant authority may select the remaining period for audit.

    ii. All cases already selected for audit under section 42B through computer ballot held under Taxpayers’ Audit Policy, 2017

    iii. Federal, Provincial and Local Government Department.

  • FBR selects 14,164 audit cases through computerized balloting

    FBR selects 14,164 audit cases through computerized balloting

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday selected total 14,164 audit cases through computerized balloting in income tax, sales tax and federal excise duty cases.

    The FBR selected 10,982 audit cases under Section 214C of Income Tax Ordinance, 2001.

    The revenue body selected around 3,126 sales tax cases under Section 72B of Sales Tax Act, 1990.

    Further, 56 cases have been selected under Section 42B of Federal Excise Act, 2005.

  • FBR to conduct balloting for audit selection

    FBR to conduct balloting for audit selection

    ISLAMABAD: Federal Board of Revenue (FBR) to conduct balloting for selection of audit cases on Thursday, April 04, 2019.

    The balloting will be conducting for audit selection of income tax returns filed for tax year 2017.

    Around 1.84 million tax returns were filed for the tax year 2017 by salary persons, business individuals, Association of Persons and corporate entities.

    The audit selection would be made in income tax, sales tax and federal excise duty.

    The FBR conduct balloting to select audit cases under Section 214C of Income Tax Ordinance, 2001.

  • SBP holds SaarcFinance seminar on audit

    SBP holds SaarcFinance seminar on audit

    KARACHI: State Bank of Pakistan (SBP) hosted a seminar on ‘Internal Audit: Emerging Challenges and Effective Practices in Central Banks’ under the aegis of SAARCFINANCE Forum at National Institute of Banking and Finance, Islamabad during 27-29 March 2019, a statement said on Saturday.

    Besides Pakistan, officials from SAARC central banks participated in the event.

    Qasim Nawaz, Executive Director, SBP inaugurated the seminar.

    While addressing the inaugural session, he stated that until a few years back, business process reengineering was at the core of innovation in banks.

    While advancements in technology have further transformed the horizon of financial services, these innovations are also raising challenges of their own.

    Adding further, he stated that the board and the senior management of State Bank are cognizant of the need to align its internal operations to the changing environment, and to promote innovation in the financial sector in a regulated environment.

    Horst Simon, the keynote speaker of the event, discussing technological risks faced by business around the world, highlighted the importance of risk culture inculcated within the organization.

    He emphasized on the roles and responsibilities of board, senior management and the employees to maintain a robust risk management mechanism.

    The seminar was also addressed by Zayeem Bin Alam, Senior Manager of PricewaterhouseCoopers.

    Zayeem discussed the risks of cyber security, social media, data privacy and third party risks and offered an IT auditor’s perspective of how to address those risks by discussing controls.

    Syed Sohail Javaad, Director Payment Systems Department shared the on going developments about digital payments, their importance, evolution, the benefits of disruptive technologies to regulators, the emerging risks and appropriate responses to them from the perspective of internal audit.

    Apart from these speakers, the delegates of the central banks also presented their country papers for the information of the audience.