ISLAMABAD: The Directorate General of Intelligence and Investigation Inland Revenue (IR) Islamabad introduced the concept of ‘Real-Time Monitoring of Withholding Taxes’ to check tax evasion, frauds and concealment of income by business ventures and companies, who pack up these businesses by earning handsome amount in 1-2 years.
As per details, the concept of ‘Real-Time Monitoring of Withholding Taxes’ is a unique concept to check evasion before filing of income tax returns by such business ventures. Under the Universal Self Assessment Scheme, units have enough time to earn huge profits within one year and run away before time come for filing of income tax returns. The only way to tackle such short-time business earners is to start ‘Real-Time Monitoring of Withholding Taxes’ so that department can legally approach the units for monitoring of withholding taxes.
Fiscal Intelligence which is one of the core functions of the IR Directorate General of I&I and during the exercise it has been revealed that in Pakistan there are various businesses wherein business ventures are lodged with aggressive advertisement campaigns, huge taxable profits are earned, but much before the intervention of tax authorities, books are closed, businesses are wrapped up, business premises are abandoned and ground work is initiated for some new such venture. Real Estate projects, IT Outsourcing, pyramid schemes, Multi-Level Marketing (MLM) are the few popular areas for such businesses. In addition to the trickery of the fraudsters, peculiar nature of Income tax proceedings also encourages the aforementioned trends. “Take the money and run businesses while escaping the tax net, as Pakistan’s recent past has witnessed a score of such companies.
Therefore, the best legal way to pre-empt such commercial-cum-tax frauds is ‘Real-Time Monitoring of Withholding Taxes,’ because tax withholding starts with the start of business and it offers hassle free interaction with the new businesses. Through this model all such evasive businesses can be hooked, booked and at least transactional taxes (Withholding/Sales Tax/FED) can be recovered right in time. This model of monitoring is based on the following basic pillars. Identification of new/emerging businesses in the respective jurisdictions through print/electronic media, internet surfing, discreet but frequent field visits by officers.
Analysis of withholding statements already filed. The quick interface of Withholding Zone(s) with the businesses prior to the filing of Withholding statements/returns. Taxpayers’ education, especially on account of Withholding Tax provisions. Withholding Tax audits of quarterly payments/receipts liable to tax withholding. Detailed Reports based on the findings.
During the aforesaid exercise the nature of such businesses needs to be fully understood before filing of annual tax returns. (This exercise would greatly facilitate the subsequent Desk audits and selection of cases for regular audit). This proactive model, if enforced effectively through respective Withholding Zones, can re-establish the writ of the department, pre-empts most of the commercial/Tax frauds and enhances the revenue as well.
