Audit report for FY23 tax period: AGP objects to FBR’s increased reliance on WHTs

ISLAMABAD: The Auditor General of Pakistan (AGP) has strongly objected that the Federal Board of Revenue (FBR) has increased reliance on withholding taxes instead of improving capacity to check tax evasion and audit mechanism.

This has been mentioned in the AGP audit report (audit year 2022-23) for the tax period of 2021-22.

The AGP is surprised that withholding taxes, which are indirect tax, are made part of the direct taxes collection. The collections of withholding taxes under different heads are indirect instead of direct, but the same are being collected/treated as direct taxes.

The AGP report pinpointed that the tax collection under the withholding tax regime relies on the persons making payments by treating them as withholding agents. In other words, there is no active participation of the FBR regarding tax collection under this head.

As the tax collection under this head is somewhat easier, therefore, withholding taxes form a major part of the total tax collection of the FBR.

“Rather than increasing its capacity to capture tax evaders and strengthening audit mechanism to monitor self-assessment system, FBR has increasingly relied on the withholding tax regime,” the AGP added.

Meanwhile, the AGP unearthed irregularities to the tune of Rs425.474 billion committed by the FBR’s field formations during 2021-22.

According to the AGP’s audit report, there is a huge variation of Rs9 billion in tax collection figures between the FBR and that reported by the State Bank of Pakistan (SBP) for the period of 2021-22.

The said variation in figures may not present a true and fair picture of financial statements because the refund issuance figures from the external sources, ie, the SBP was on the lower side.

As a result of the audit, a recovery of Rs21,873.80 million was verified by audit during 2021-22.

There is also a difference of Rs30.6 billion in the refund payment figures reported by the FBR and those maintained by the SBP.

The AGP has recommended the FBR for reconciliation of data with the SBP for the period of 2021-22.

Copyright Business Recorder, 2024