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USAS scheme: small percentage of returns to be selected for audit

ISLAMABAD (September 23 2004): The Central Board of Revenue (CBR) has decided to select a very small percentage of income tax returns pertaining to 'tax year 2004' for audit under Universal Self-Assessment Scheme (USAS).

The discretionary powers of the Commissioners of Income Tax (CITs) would be considerably reduced under the parameters being devised for audit selection.

Official sources told Business Recorder here on Wednesday that the CBR has on principle agreed to select a small percentage of corporate and non-corporate cases for audit. However, the parametric selection of cases for audit would not be more than the previous year's percentage. The number of cases selected did not exceed even 4 percent of the total number of business returns in 2003.

The tax managers are confident that selection of small percentage of cases for audit would promote voluntary compliance and instill confidence in the business community.

The CBR has no intention to disclose the parameters of audit to the taxpayers, as the parameters would remain confidential and would not be communicated to the taxpayers prior to selection procedure.

Officials said that CBR would devise the parameters and communicate the same to the Commissioners of Income Tax (CITs) for compliance. But it has been decided to further curtail the discretionary powers of the CITs under the parameters being devised for selection of cases for audit.

“The parameters would not be exactly the same as announced last year. But these would be devised on the same lines as laid down last year by the Board”, officials said.

When asked why CBR is not ready to disclose parameters despite business community demand, they said that all over the world the cases are selected for audit without disclosing parameters to the taxpayers. If the parameters were communicated to the taxpayers prior to selection procedure, it would not act as a deterrent. It would be against the concept of universal self-assessment scheme to disclose parameters to the taxpayers.

The CBR expects over 1.3 million income tax returns in September, which would be brought to the federal capital for capturing at Centralised Data Entry Centre, Islamabad.

It is expected that the amount of tax would be much higher as compared to the amount collected last year from corporate sector.

The analysis was carried out of income tax returns captured at Data Entry Centre, Islamabad established by the CBR as a part of restructuring of tax administration.

It is important to mention here that as per Income Tax Ordinance 2001, the powers to evolve parameters for selection of cases for audit and thereafter making such selection on those parameters vests with the Commissioners of Income Tax (CITs).

There was an apprehension at Board's level that tax year 2003 being first year of USAS, the commissioners may not be clear in developing parameters and adopting the modes of selection for audit. Moreover, it would have created a heterogeneous situation by each CIT adopting his own parameters. To remove these apprehensions, the CBR and CITs collectively evolved uniformity on selection process.

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