LAHORE, Aug 30: The majority of non-corporate taxpayers, who had filed their IT returns for 2003 under the Universal Self- Assessment Scheme (USAS), have responded half-heartedly to the CBR incentive. The Department had announced to waive the audit of those taxpayers who agreed to pay 20 per cent extra tax on their original returns.

"The number of payers who wanted to enjoy this exemption was not big", admitted a senior Income Tax (Eastern Region) official while talking to Dawn on Monday. He conceded that many had contacted the IT department regarding the exemption when the CBR had circulated the incentive, more than a month back".

The IT official said that there were many factors responsible for the insipid and dull response to this offer". "Most taxpayers were busy in preparing their returns for 2004.

Around 140-150 people had moved the High Courts against the audit decision of the selected taxpayers. Many await the outcome of court cases before availing the incentive," he said.

The CBR, in a circular (No.1 (1)S.(ITAS)/2004), had stated that the decision was made to "facilitate" the non-corporate taxpayers who had filed their returns under the USAS, and were chosen for audit under the Income Tax Ordinance 2001.

The incentive, according to the circular, could be "availed by those against whom no definite information existed, and upon acceptance, audit in their case would be closed". The incentive was being viewed by many senior CBR officials and the tax lawyers as a "blow to the documentation of the economy".

Speaking to this reporter, a former Lahore Tax Bar Association (LTBA) President, Shafqat Chohan, said that around 24,000 taxpayers had been selected by the IT Department all over the country under Section 177 of the IT Ordinance 2001.

He said that the cases for audit were "selected by the IT commissioners by using their jurisdictional authority" as the law does not provide for any such selection. He claimed that about 400 affectees across the country had moved the High Courts, and had also obtained decision against it.

Chohan said that he was at a loss to understand as to under which law the CBR had made this offer because this defeats and negates the documentation of economy and a check on declarations. Moreover, he said, there was no provision for such a circular.

"Audit selection followed by its reversal itself, explained the flaws in the USAS and the IT laws. The government must revise the law to make it a taxpayer-friendly, and should achieve the purpose for which it had been enacted," he said.

When contacted, a senior CBR official said on the condition of anonymity that the purpose of introducing the USAS was defeated when authorities accepted the incomplete returns".

"About 64 per cent of the returns filed under the USAS did not contain information such as the wealth statement, the NIC and the NTN numbers, stock turnover/volume, etc. The acceptance of incomplete returns amounted to the acceptance of a non- compliance," he said.

He conceded that the immunity was against the restructuring philosophy and the documentation of economy. "The business community, when the USAS was being contemplated some two years' back, had committed to pay 20 per cent more tax in return for audit immunity. Had the CBR accepted that proposal our collection would have increased by about Rs2bn, through some 500,000 taxpayers.

He also conceded that a major challenge for the new Prime Minister would be to stop the documentation process' reversal, and put the CBR back on the path of reforms" initiated by himself few years ago.

"Audit exemption was not only against the law but was also contrary to Shaukat Aziz's own statement at the Multan Chamber of Commerce and Industry wherein he had categorically denied audit immunity," said the CBR official.