ISLAMABAD, April 8: The Central Board of Revenue has finalized a national audit policy for sales tax to minimize the chances of tax evasion. Officials told Dawn on Friday that the new policy, aimed at achieving a preventive effect, would provide an incentive for taxpayers to comply voluntarily with the tax system. The sales tax audit policy is based on the models of Sweden, Germany, Malaysia, Singapore, South Africa and some other developing countries, which has been successfully implemented in those countries and has shown tangible results.
Under the policy, the officials said, taxpayers would be selected for audit through mixtures of four major approaches — cyclical audits, high risk audits, knowledge and experience audit and random selection audit.
Three criteria will be adopted for the audit of registered persons. For the non, nil, null filers of sales tax and tax paid below 0.1 million during the last year, the selection of registered persons will be on random basis and knowledge and experience basis. The number of registered persons under this category will be substantial, which will not be possible for the sales tax department to pick every case for audit, so the random selection would be adopted in this case.
For the highest taxpayers, who paid above Rs50 million during the last year, the cyclical audit approach will be adopted. This means that under this category the total registered persons stood at 278. The 278 audits are to be conducted once every two years, based on even and odd numbers each year and adopting fixed audit cycle approach.
For the medium taxpayers, who paid tax above Rs0.1 million and below Rs50 million, the selection for audit will be on risk basis. Under this category, the total number of registered persons is 22,740. As the total number of registered persons is high this case will come under risk base approach.
The risk base approach selection will be made on parameters i.e. input is higher as compared to the previous year, output is low as compared to the previous year, value addition is low as compared to the previous year, refund claimed is above Rs10 million and business category.
According to the officials, the CBR would select the registered persons for audits on collectorate wise on a yearly basis and it would be based upon information as per tax return filed by the registered persons during the previous year — July-June.
The new audit policy also envisaged detail measures for composition of audit teams, divisions; issuance of audit schedule; procedure for starting of audit and conducting of audit; procedures for monitoring of audits, completion of audits, issuance of audits; an exhaustive training programme for audit managers and auditors; performance evaluation, promotion of auditors and availability of transport for auditors.
