The non-filing of wealth statement and refund claims of Rs 5 million were considered as key parameters for selection of non-corporate audit cases for Tax Year 2011. Sources told Business Recorder here on Thursday that the Federal Board of Revenue (FBR) applied 24 and 20 parameters for selection of 1,217 corporate taxpayers and 8,523 non-corporate taxpayers, respectively for selection of cases for audit of Tax Year 2011 through parametric computer balloting.
Sources stated that the parameters for selection of cases for audit have not been disclosed by the FBR at the time of parametric balloting. Out of 24 parameters for corporate cases for Tax Year 2011, one of the criteria is that the increase in turnover does not reflect proportionate increase in income. Another criterion is that the financial cost is more than 5% of turnover.
Other parameters for the corporate cases included persistent decrease in net profit over last three years (total 5%) and persistent decrease in net profit over last three years (total 5%). Similarly, another audit parameter is the consistent decrease in output tax/input tax ratio over last three years (total 5%).
Two more parameters for selection of corporate cases for audit are 10 percent decline in sales in the income tax return over last year and 10 percent decline in supplies of the sales tax registered persons as compared to previous fiscal. One of the criteria for Tax Year 2011 is the refund claim of income tax stood at Rs 10 million. Another parameter is that imports in customs differ from declared Imports in sales tax return or income tax returns. The criteria also included cases showing addition in machinery and plant/depreciable fixed assets in Tax Year 2009 without corresponding increase in turnover for Tax year 2011.
Out of 20 parameters for non-corporate cases, one of the criteria is that the hotels/restaurants with cost of sales over 70% of turnover/net sales. The non-corporate parameters also included continuous declaration of loss for the last three years and continuously declaring less income for the last three years. Other criteria included increase in turnover does not reflect proportionate increase in income and financial cost is more than 5% of the turnover. Other parameters for selection of non-corporate cases for audit included registered persons (other than exporters) claiming refund consecutively for the last 12 months and import purchases differ from value of imports in customs data by 5 percent, sources added.
Three more parameters are: net Profit to Sales Ratio differs from Sector Ratio by 10%; percentage of Gross Profit to expense differs from Sector Ratio By 10% and Gross Profit to Total Sales Ratio differs from Sector Ratio By 10%. Another parameter for non-corporate cases is that the net tax is less than 10% in comparison to previous year. Cases where more than 75% of sales cost is paid to 'unregistered persons', are also included in the criteria for selection of non-corporate cases for audit.