Tax officials in Pakistan have been granted the authority to enter the premises of taxpayers for conducting audits or surveys, according to the Federal Board of Revenue (FBR).
The empowerment stems from Section 175 of the Income Tax Ordinance, 2001, which grants tax officials extensive powers to access taxpayer premises without prior notice for the purposes of auditing accounts and conducting surveys related to tax liabilities.
The regulations, as outlined in Section 175, allow tax officials to enter any taxpayer’s premises at any time, enabling them to carry out audits or surveys to verify the accuracy of financial records. Under these provisions, tax officials can access a range of documents, including physical records and computer data, that are essential to determining the taxpayer’s liability. This marks a significant shift in the FBR’s approach to tax enforcement, aiming to ensure compliance and tackle tax evasion.
According to the details provided by the FBR, tax officials now have “full and free access” to taxpayer premises, accounts, documents, and computer systems. This includes the right to examine documents, make extracts or copies, and impound materials when necessary for further investigation. In cases where information is stored digitally, tax officials are empowered to seize computers or data storage devices to copy the necessary data. This expanded authority is seen as a means to make tax audits more thorough and reduce opportunities for tax evasion.
Moreover, tax officials can also inventory any articles found on taxpayer premises during such audits. The FBR has clarified that in order to enforce these powers, the Commissioner of the FBR or any designated officer has the authority to act without prior notice, which may raise concerns about privacy but is intended to prevent taxpayers from tampering with records before an audit.
The law also allows tax officials to involve external experts and valuers. These professionals can be authorized by the Commissioner to enter premises and perform specific tasks to aid in the audit or survey. This provision aims to ensure that audits are conducted by experts who can accurately assess complex financial situations.
Taxpayers are required to cooperate with the tax officials during such inspections. The occupier of the premises – whether the owner, manager, or another responsible person – must provide reasonable assistance to tax officials to ensure the smooth conduct of audits and surveys. The tax authorities also assure that any documents or computers seized during an audit will be signed for by the Commissioner or an authorized officer to ensure proper documentation.
For those whose accounts, documents, or computers are impounded, the law provides a provision for examination and copying of the seized materials under supervision. However, the law stipulates that if any seized items are lost or destroyed during the process, the FBR will compensate the owner of the materials for the loss.
One of the key provisions in Section 175 is that it overrides any laws relating to privilege or public interest concerning access to premises or the production of documents. This provision underscores the importance of tax compliance and the government’s commitment to ensuring that tax laws are enforced without interference.
The FBR is also authorized to issue additional rules related to real-time electronic access for audits, which could streamline the audit process and improve the accuracy of tax assessments. Tax officials are expected to leverage these powers to improve tax compliance and reduce the tax gap, an issue that has long plagued Pakistan’s economy.
The move to empower tax officials to conduct unannounced inspections is seen as a necessary step in improving Pakistan’s tax system, although it is likely to face challenges from taxpayers concerned about the potential for misuse of power. Nonetheless, the FBR is hopeful that the increased transparency and enforcement will help boost the country’s tax revenue and improve overall economic stability.
