ISLAMABAD: The Auditor General of Pakistan (AGP) has detected irregularities in sales tax, income tax and federal excise duty worth over Rs275.55 billion during scrutiny of receipts and expenditures of taxes.
The audit report for 2016-17 on Federal Board of Revenue’s (FBR) Inland Revenue taxes identified cases of non/short assessment of taxes, grant of incorrect exemptions, wrong adjustment of brought-forward losses, non-levy of default surcharge, non-recovery of adjudged revenue, inadmissible adjustment of input tax, incorrect sanction of refund.
The report includes audit observations in respect of compliance with authority, audit of receipts and expenditure relating to Inland Revenue 2014-15 and 2015-16 audited between Jan-Nov 2016 as well as systemic deficiencies.
The revenue loss was reported at Rs1.30bn due to likely fraudulent and collusive non-deduction of withholding tax on contractual receipts. In a departmental audit meeting, FBR tried to twist the issue but could not provide justification as to why it could not recover the amount involved despite lapse of about a year.
The report noted that income tax amount of Rs245.59m was not deposited into the government exchequer and an amount of Rs855.3m stood as loss of revenue due to concealment of income.
The report identified non-recovery of adjudged dues/arrears of Rs55.74bn. The audit recommendations suggested expediting recovery and pursuing sub-judice cases at an appropriate level.
An amount of over Rs4bn loss was reported due to non-implementation of statutory provision resulting in inadmissible adjustment of input tax; another amount of Rs2.18bn due to inadmissible adjustment of input tax against exempt supplies and Rs2.34bn was not realised from retailers.
In two other cases, the non/short realisation of sales tax caused a revenue loss of Rs5bn. Non-registration of taxpayers in sales tax regime resulted in potential loss of sales tax amount of Rs1.615bn. The non-realisation of further tax, and extra tax due to non-implementation of statutory provisions.
In the income tax department, the non-levy of minimum tax on income caused a loss of Rs1.45bn due to weak internal control.
The loss of revenue due to concealment of income or assets was reported at Rs16.09bn. The audit department not only recommends collecting the revenue but also fixing responsibility against the persons at fault.
The short levy of tax of Rs3.28bn was reported due to issuance of SRO without approval of the parliament. In another case, short levy of super tax amounted to Rs6.24bn was reported during the year under review. The super tax was imposed for the rehabilitation of temporarily displaced persons.
Under various cases, a loss of Rs3.29bn revenue was reported due to non-apportionment of expenses between final and normal tax regime; Rs2.08bn due to non-levy of default surcharge on payment after due date, Rs1.94bn due to short deduction of withholding tax on supplies and contracts.
The audit report reveals loss of tax amounted to Rs7.35bn due to incorrect adjustment of brought forward losses, Rs6.02bn due to short levy of tax due to inadmissible depreciation allowance on fixed assets, and a loss of Rs27.47bn due to non-levy of tax on contract receipts.
Under further irregularities, the department placed non-recovery of tax demand of Rs10.68bn, another Rs4.56bn short levy of tax due to incorrect computation of taxable income, and Rs31.19bn potential loss of tax revenue due to excess claim of unaccounted for gas.
Published in Dawn, September 13th, 2017