The government has quietly closed over 310,000 tax audit cases that had been automatically selected from 2014 to 2017.
The Federal Board of Revenue (FBR) has closed over 310,000 or more than half of the total opened 600,000 audit cases. The FBR also issued a notification on Friday to give effect to the decision. The cases were active due to the failure of taxpayers to timely file tax returns and pay due taxes.
The beneficiaries of this notification include individuals, associations of persons, and companies. FBR’s decision is rooted in its incapacity to go after hundreds of thousands of people and lack human resources to effectively audit 600,000 cases.
The idea of closing audit cases came from Member Taxpayers Audit Nadeem Rizvi, who is now being tipped as the new member Inland Revenue Operations. The other two probable names are Asim Ahmad and Faiz Elahi Memon.
“If all values in the parameters, as per the system, are matched with the declaration in income tax returns and/or wealth statement or otherwise, their values are returned nil and field office does not have any third-party information that audit may be concluded by accepting the declared version,” said the FBR notification.
These audit cases had automatically been selected under Section 214D of the Income Tax Ordinance 2001. In 2015, the Pakistan Muslim League-Nawaz (PML-N) government had introduced Section 214D in the ordinance to automatically select those persons and companies for an audit that did not file income tax returns within due or extended dates or did not pay taxes.
However, the then government did not build the FBR’s capacity, resulting in hundreds of thousands of pending cases.
Subsequently, the government abolished Section 214D through the Finance Act 2018. However, criteria had been given to close these outstanding cases including recovering 25% additional tax from the people.
The FBR has now decided that where it does not have third-party information and data is matching with previous declarations, it will close all such cases.
For the closure of audit cases selected under Section 214D, the FBR had introduced a new clause 214E in the Income Tax Ordinance through the Supplementary Act 2018.
It had offered taxpayers to revise their returns voluntarily by December 31, 2018, along with payment of 25% higher tax than that paid with the return based on taxable income and where no tax is payable, 2% of the turnover and where no turnover is declared, a penalty may be paid under Section 182.
