The Central Board of Revenue (CBR) has proposed a sketchy sales tax amendment in the Finance Bill (2007-2008) to force the corporate sector for submitting audited accounts to the Collectors of Sales Tax duly certified by the auditors.
Sources told Business Recorder on Thursday that it is not clear what would be the contents of certificate to be submitted by the external auditors. The details have not been specified about the auditor's certificate and it is also not clear that why such an amendment has been proposed when the CBR and Securities and Exchange Commission of Pakistan (SECP) are already working on a mechanism to disclose movement of federal taxes at the notes of the financial statements.
Sources said it is a very unclear amendment proposed in the Finance Bill to direct the companies to furnish audited accounts to the concerned collector duly certified by the auditors regarding discharge of sales tax liabilities as per law. If sales tax accounts needed to be furnished, then you can also include income tax for the same purpose of audited accounts.
There is a need to amend the provision supported by the CBR's instructions or powers to change the procedure for this purpose. Through proposed amendment in Section 22 of the Sales Tax Act,
"The registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984, shall be required to submit a copy of the annual audited accounts, along with a certificate by the auditors certifying the payment of due tax by the registered person."
Sources said it seemed that the CBR Sales Tax Wing has unilaterally drafted the amendment without knowing the facts that an exercise is also under way to verify company's payments under a proper mechanism.
The board has already requested the SECP to make it mandatory for the companies to specify details of tax deducted at the 'notes to the account' given in the Financial Statements. A detailed information may contain 'open balance' deduction of tax, remaining taxes and balance carry forward etc under the 'notes to the account.'
Source said the information on federal taxes required to be disclosed by business units should be made part of the 'notes attached and forming part of financial statements.'
The financial statements already contain a large number of notes to the accounts and there has been a steady increase in their number and contents over the years. The addition of one more note, and even that for every justifiable cause, will hardly cause any major controversy.
The auditors are required to report on the financial statements as well as the notes attached to the accounts as part of their routine audit assignment. They will thus have to report on the 'tax note' also, automatically without any undue fuss being created for them having to perform 'undesirable work' at the insistence of CBR.
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