KARACHI: The private sector has suggested the tax authorities to conduct tax audit at once in a year to restore the confidence of honest taxpayers which would ultimately bring investments, reduce administrative hassles, release resources for operations and potential tax would increase substantially.
The private sector said that clear line should be drawn between honest taxpayers and tax evaders, before initiating tax audits. Parameters for audits selection should be transparent.
It is further recommended that only one audit should be conducted during a year and in case there is no adverse report, there should not be any further audit for at least next three years. This includes monitoring of withholding under section 161 as well.
It is mentioned, initiation of tax audits by the authorities practically for all assessment years not barred by the statute of limitation, has defeated the purpose of universal self-assessment schemes introduced in past years.
It is being witnessed that more than one tax audit had been conducted by the tax authorities under various provisions of the income tax statute like under section 177, 122(5A) and 161 of the Income Tax Ordinance 2001.
It is reported that in past years, apparently the tax department has issued this tool to harass honest taxpayers to generate additional revenue. The information requested in such notices is huge and practically impossible to gather.
The private sector has further recommended the government to reduce advance tax rate to 80 percent from the current rate of 90 percent in the upcoming budget of 2014-215.
As in the existing situation, the Income Tax Ordinance requires companies to pay advance tax on the quarter’s turnover in same proportion as the tax assessed for the latest tax year bears to the total turnover for that year.
It further said that under Section 205, if any taxpayer fails to pay advance tax or the tax so paid is less than 90 percent of the tax chargeable for the relevant tax year, he shall be liable to pay default surcharge tax at 18 percent on the amount of tax so, chargeable or the amount by which the tax paid by him falls short of 90 percent, as the case may be.
As the payment is based on estimation and the revision of threshold down to 80 percent would result in easing of the cash flows.