KARACHI: The Board in Council of Federal Board of Revenue (FBR) has decided to abolish automatic audit selection of non-filers of tax returns in the upcoming budget for the fiscal year of 2019.
This was stated by Tariq Masood, Member Legal of FBR during a pre-budget seminar organised by Karachi Tax Bar Association (KTBA).
“The taxpayers will have good news in the budget on the issue of automatic selection of audit,” he said.
Government introduced the Section 214D into the Income Tax Ordinance, 2001 through Finance Act 2015 under which a taxpayer is automatically selected for audit if income tax return is not filed for the preceding year. The law resulted in accumulation of audit cases and some estimates suggested that the pendency of audit cases reached to around one million.
Masood said the FBR is also working on streamlining the audit cases. “The board in council of the FBR has recently decided to avoid multiple tax audits under audit policy.”
“It is decided that if a taxpayer selected under Sections 214C or 177 of the Income Tax Ordinance 2001 during the past year then the FBR will not select the taxpayers for next year,” he added.
The members of KTBA criticised tax offices for issuing multiple tax audit notices to taxpayers, which resulted in harassment.
KTBA also highlighted the impediments in sales tax registration for industrial and manufacturing units. KTBA officials said there are harsh penalties even on those provisions of tax laws where revenue is not involved.
Member Legal said the FBR is considering reducing the amount of penalty in the coming budget in such cases.
On the issuance of return form by FBR, Masood said the return for tax year 2018 would be issued in the first week of July to enable people to easily file their annual returns.
KTBA officials said four million commercial and industrial consumers have been given electricity connections, whereas FBR could only receive 1.4 million annual returns.
The member legal said the electricity meters were not installed in the name of individuals running industrial or commercial activities. “In this scenario, FBR is unable to enforce laws,” he added.
Rehan Siddiqui, partner at accountancy advisory service Baker Tilly said there is a massive trust deficit between taxpayers and tax officials. Tax of salary persons is deducted at source yet they are issued notices for audit. “Such measures would prove counterproductive for broadening of tax base.”
Mazhar Saleem, partner at auditing firm KPMG said the government should reduce sales tax rates on petroleum products and instead fix a standard rate of 17 percent.
