February 26, 2008	Tuesday	Safar 18, 1429

KARACHI, Feb 25: Tax practitioners and consultants have resented the Federal Board of Revenue (FBR) move to allow the field staff to widely use ominous clauses of the Income Tax Ordinance, 2001 with a view to meeting the yawning revenue deficit of over Rs40 billion during the current fiscal year.

The field officers working under the audit division have been empowered by the new system to open tax cases for detailed audit. However, the number of these cases would not exceed five per cent of total tax returns, which presently stand little less than two million.

Nevertheless, it is being observed by tax practitioners and consultants that the field officers, who face difficulty in opening tax cases for detailed audit owing to cumbersome procedure, have resorted to discretionary powers from where the FBR departed way back to built confidence between the taxpayers and the tax collectors.

Consequently, about five years back the FBR introduced Universal Self-Assessment Scheme (USAS) under which tax amount paid by taxpayers along with the returns was taken as full and final liability and the document was taken as an assessment order.

The law did not allow tax collectors to go for detailed audit of more than five per cent of the total number of returns received by the FBR.

The spirit and objective behind this system was to minimise direct contact between taxpayers and tax collectors, which had resulted in rampant corruption.

The FBR early this month came out with a scheme to go for selective audit in order to apprehend potential tax dodgers. However, the tax consultants observe that the revenue authorities are widely using powers available to the commissioners under section 122(5A), section 161/205 and section 177(4) of the Income Tax Ordinance 2001.

They further said that all these sections and clauses gave sweeping powers to the tax collectors because taxpayers were being served with notices thereby causing harassment and intimidation.

The new system would go a long way in damaging the confidence-building measures developed between the taxpayers and tax collectors during the last five years, they added.

The consultants said that section 122(5A) gives powers to the commissioner to amend an assessment order, if he considers that the assessment is erroneous in-so-far it is prejudiced to the interest of revenue.

According to the tax consultants the tax authorities are widely using section 122(5A) for opening of tax cases of large corporate taxpayers, whereas section 177(4) is being used for opening cases of corporate and non-corporate.

The section 177(4) gives more powers to the tax collectors to pick cases for an audit if a person’s history of compliance or non-compliance of the law or short tax paid etc.

As a result of these powers taxpayers are being forced to strike a deal and settle their tax matters if they do not want to go through the hassle of detailed audit and long hearings before the tax officials.

In a recent annual general meeting of All Pakistan Tax Bar Association held in Multan around 28 members of the bar came up with such issues confronting taxpayers and urged the apex bar to take them up with the FBR.

Speakers at the AGM said they always encouraged their clients to pay taxes and discouraged tax evasion but what it seemed that the tax collectors are bent upon reviving their past glories of corruption.

Some of the members demanded of the FBR to revise its revenue budget of Rs1.025 trillion downward because for the last eight to nine months there had been political turmoil and the law and order situation had been at its worst.