CBR to conduct 'desk audit' of taxpayers

ISLAMABAD (January 02 2003) : While terming the performance of sales tax auditors as below standard, the Central Board of Revenue (CBR) will conduct country-wide 'desk audit' of thousands of taxpayers with low turnover and low risk profiles (doubtful computerised data pertaining to a particular unit).

The CBR claims that the exercise would enhance the capacity of audit enabling the authorities to ascertain the actual tax liability and amount of tax deposited by registered units.

The CBR would revise parameters of 'desk audit' after analysing the data pertaining to registered taxpayers during 1999-2000, 2000-2001 and 2001-2002 under the six slabs of annual turnover.

These slabs include turnover above Rs 1 billion; turnover above Rs 500 million; turnover above Rs 100 million; turnover above Rs 50 million; turnover above Rs 25 million and turnover above Rs 5 million.

The authorities have constituted desk audit teams in each collectorate under the supervision of a Cost Accountant, Deputy Collector, Audit or Assistant Collector, Audit.

A senior official told Business Recorder on Wednesday, the minimum requirement of audit in the VAT mode on yearly basis is around 25 per cent as per international standards.

The CBR conducted 22,267 audits in 2000-2001 against 8,627 audits in 2000-2001. The total sales tax audit carried out in 1999-2000 was 4,977.

The present audit coverage ratio of registered taxpayers and above-mentioned data indicate that the current pace of audit is far below the international standards.

Keeping this in view, the CBR has decided to conduct 'desk audit' to enhance the audit capacity in minimum time with the help of existing audit staff.

The CBR has expressed its serious concern that the collectorates have failed to follow the audit report evaluation procedure prepared for this purpose by auditors, senior/special auditors.

The CBR has restricted the sales tax auditors to follow new procedure for the completion of audit otherwise the audit department would not accept the audit reports dispatched by the collectorates.

Under the new system, the CBR has made it mandatory for the auditors to fulfil the following conditions:

1. The audit should be completed following 'Audit Hand Book' prepared by Price Water Homes Coopers.

2. All conditions of Sales Tax General Order 1/99, CBR instructions and other orders should be followed.

3. The auditee is provided with audit observations.

4. The audit report copy is sent to CBR for review.

The official said that if the regional auditors failed to comply with any one of the above-mentioned conditions, the audit report would not be considered as final.

The CBR has also noted that after a lapse of six months, the collectors of sales tax were unable to provide the details of monthly selected audit cases to the CBR.

It is compulsory for the officials to submit the list of units selected for audit on monthly basis under CBR's directive of June 18, 2002.

Furthermore, the regional officials also failed to provide the audit reports of units where audit has been completed.

Unfortunately, the authorities did not follow the instructions.

The units audited during the last two years should not be audited again and the list of such units is required to be provided to the Board. But tax collectors again failed to follow this directive as well.

In a query to collectors, the CBR said, “It is astonishing to note that why the officials engaged in audit were not ready to follow the laid down rules and procedure”.

The CBR also specified that the regional collectorates were also not following Sales Tax General Order 1/99, which says that selection of units/registered persons for audit should not be left to the Auditors / Senior Auditors /Audit Division itself.

Rather the selection for audit and assignment of unit/person of the Auditors should be done through computer programming.

Only Additional Collector /Collector may select units/ persons manually (on the basis of his choice or information or direction from CBR) for the purpose of getting audited.

However, such a manual selection may not generally exceed 10% of the total audits conducted.

The same Auditor /Senior Auditor /Special Auditor should not, as or general rule , audit the same unit/person more than once in 2 years.

In other words, auditors/audit teams for particular units should keep on changing.

The audit should be conducted in a systematic and organised way to ensure that one registered person is subjected to audit not more than once in six months, unless, of course, some emergent situation calls for another audit during the aforesaid period.

The registered person should be informed about the audit and details of records to be audited at least 10 days before the scheduled date of audit.

The audit should be completed normally within 3 to 4 days unless situation requires more time, for which written permission should be obtained from an officer not below the rank of Assistant Collector on receipt of written request of the Senior Auditor or Auditor containing plausible reasons for extension of duration of audit.

If the Collector is convinced that the audit was not conducted effectively or the audit report was not prepared properly or that there is an apparent lack of professional outlook, malafide intent or negligence, he should proceed against the concerned auditors.

One copy of such audit reports, which reflects detection of Sales tax amounting to Rs 1 million or above or which points out towards a serious procedure lapse should invariably be sent to the CBR.

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