ISLAMABAD (March 28 2003) : The International Monetary Fund (IMF) has expressed concern over the poor performance of the Central Board of Revenue (CBR) sales tax auditors and recommended monitoring of auditors performance to identify and assess tax liabilities of businessmen with incomplete record.
The auditors should start a campaign to pinpoint business concerns with inadequate records and incomplete books of accounts, as tax dodgers involved in evasion of one tax would be evading other taxes as well, the IMF said.
Presently, 550 auditors are working under the control of CBR member audit, whereas another 300 are engaged in refund audits or investigation under member sales tax.
The IMF has informed the tax authorities that approximately 70 percent of the taxpayers were reporting less turnover than the enrolment threshold.
This gave a strong indication that there was extensive under-reporting of sales tax liabilities.
The mission pointed out that a total of 32,265 sales tax audits were completed since July 2001.
Over 60 percent of such audits, ie, 19,578 failed to detect 'further tax' liability.
This indicated that the quality as well as integrity of the audits was extremely poor or the audit selection methods were ineffective, the IMF maintained.
The IMF said that under-reporting of revenue, non-filing of returns and refusal to keep business records by the taxpayers were extremely serious issues for both the sales tax and income tax auditors.
The taxpayers successfully evading one tax were likely to be evading other taxes also.
The measures or reconstructed income methods could be used to detect further sales tax and income tax liabilities of people, who keep incomplete books of accounts.
The powers to assess tax liabilities on the basis of indirect methods of determination could be sought for both, auditors of sales tax and income tax.
The mission was of the view that it was unclear how many of the 22,267 audits performed in 2001-02, were comprehensive, single focus or other types of audit.
The CBR should ensure that the sales tax audit programme contains several types of audits function.
The management information programmes should distinguish each type of the audit so that the effectiveness of those audits could be compared to the expected results or targets, the IMF added.