FBR forced to stop top business executives’ IT audit

[Naveed Yaseen]

By Muhammad Yasir
KARACHI: The enthusiastic efforts of tax department to generate revenues have been restrained when executives of corporate sector have lobbied successfully to stop their income tax audit.

The Federal Board of Revenue (FBR) has been stopped to conduct any sorts of income taxes audit of executives and directors of private and public sector companies after it served audit notices recently to the selective taxpayers based in Karachi.

Tax official told the authorities at Regional Tax Office (RTO) Karachi, the biggest revenue-generating unit, had evaluated the income and expenditure of persons drawing lucrative salaries and other fringe benefits of the companies’ top brass including Chief Executive Officers, Chief Financial Officers, Director Generals, General Managers, Accountants, Auditors and others having with key posts.

But tax officials had to face harsh reaction from the side of highest income taxpayers, who categorically declined to cooperate with the department, and managed to pressurise the department to suspend its audit plan.

An official involved in the process told Daily Times the RTO Karachi assessed 2,500 cases of individuals drawing salaries in upper slab and selected most of them for audit under section 177 of the Income Tax Ordinance, 2001.

“When we served the notices we have started facing reactions of the selected taxpayers within a week which resulted high pressures form the powerful corridors and the taxmen finally had to step back,” he told on the condition of anonymity and added these executives were mainly from banking, multinationals, engineering and consultants etc.

A number of executives are receiving lucrative packages from their companies but they are reluctant to mention it in tax returns, they added. In the past senior tax managers frequently urged the FBR to conduct audit of top officials of mega corporations, large companies in public and private sectors. Another official designated to carry out audit assignment criticised the policymakers for their disappointments over slow tax reform process, saying if the authorities have been toothless to collect taxes from executive class so how can reforms take place in revenue department.

Seeking anonymity, he commented the government sets tallest revenue targets with the aim to enhancing Tax-to-GDP ratio but whenever the authority takes any initiatives, it is stopped.

The officials are empowered to conduct audit of any individual or a company under Income Tax Ordinance, 2001.

The Ordinance defines that under section 177 a commissioner has powers to select a person for audit of the person’s income tax affairs having regard to –

“(a) the person’s history of compliance or non-compliance with the Ordinance;

(b) the amount of tax payable by the person.

© the class of business conducted by the person; and (d) any other matter which in the opinion of commissioner is material for determination of correct income.”

http://www.dailytimes.com.pk/default.asp...2009_pg5_1