Internal audit, inspection of companies, registered units: DG Internal Audit Inland Revenue retrieves Rs 17 billion

Directorate General of Internal Audit Inland Revenue has retrieved revenue loss of nearly Rs 17 billion out of total detection of Rs 28 billion during internal audit and inspection of companies and registered units in 2009-2010. The internal inspection department of the Federal Board of Revenue (FBR) has also recovered Rs 6614 million pertaining to 131 pending reports.
The directorate has expressed serious concern over the manner, the FBR neglected the DG Internal Audit Inland Revenue, which has detected massive amount of revenue leakage taking place due to negligence of the tax officials in tax matters of registered persons.
Sources told Business Recorder here on Thursday that the directorate has recently submitted the report to the FBR to highlight internal loopholes in the system where over Rs 28 billion revenue loss have been detected through internal scrutiny of tax records of selected registered units. The directorate has shown substantial increase in retrieval of revenue loss during the period under review against same period of previous fiscal. Directorate has audited 301 units and finalised 118 reports, which resulted in retrieval of revenue of nearly Rs 17 billion out of detected loss of Rs 28 billion during the period.
According to sources, the volume of activity under the head "Inspection" relevant to 2009-2010 increased by 73 percent due to inspections conducted by the directorate. Due to diligent follow up by the Directorate General, the number of reports where final/partial action has been completed by taxation officers has increased, which is commendable in view of shortage of officers and staff.
During the year under reporting 301 functional units were audited and 118 reports were finalised, which resulted in retrieval of loss of revenue amounting to over Rs 16976 million out of detected loss of over Rs 28191 million which is sizeable. In addition, the Directorate General concentrated its efforts on retrieval of earlier years' loss. A total number of 131 pending reports were finalised and loss worth Rs 6614 million was retrieved through the concerted efforts of audit teams.
The directorate said that the objective of Internal Audit is to seek evidence that revenue is assessed and collected according to law and errors of omission and commission are avoided. Gaps are identified and follow up is made till retrieval and recovery of lost revenues. The whole process helps the field formations in improving the quality of their responsibilities.
Unfortunately, Internal Audit has been the neglected arm of the Federal Board of Revenue. Its potentials and values have not been realised, so much so that it has not been included in Tax Administration Reform Programme. Internal Audit has certain impediments and limitations, sources said.
The directorate has complained that all field offices have been housed in renovated buildings with all the paraphernalia, whereas the offices of the Directorate General are still located in rented premises without sufficient basic amenities. The shortage of officers and staff coupled with frequent transfers without consulting the Directorate General is a cause of delays in fulfilment of planned work thus hampering the efficiency. Despite the fact that the mandate of the Directorate General has been extended to the Sales Tax and Federal Excise functions, Officers and Staff having experience in these taxes have not been posted so far.
The Audit and Inspection reports are not given due weightage vis-à-vis External Audit. Despite directorate's best efforts regarding follow-up, timely response from the field formations is not forthcoming, as a result, potential revenue yielding cases are hit by limitation.
The directorate further informed the FBR that the disciplinary proceedings against the defaulting officers are not initiated in time by the field formations with the result that the officers are either retired or transferred in due course of time. Since the Internal Audit is not vested with any executive or judicial powers, therefore, the Administrative Structure does not allow the Directorate General to nip the evil in the bud, directorate stated.
The FBR is suffering both tangibly and intangibly by neglecting the directorate and the situation necessitates that the role of Internal Audit be strengthened. The Internal Audit department has the legal responsibility to conduct periodic inspection and audit of the activities of the Inland Revenue Officers taking into account the essential principle of transparency, while conducting the official business.
The performance of the Directorate General has practical value only if its recommendations are implemented in letter and spirit. The mandate of the Organisation, therefore, needs to be extended beyond a recommendatory body by incorporating changes in the law wherein it should be given powers to take action against the departmental officers on non-compliance of its observations contained in Inspection and Audit Reports. Due weightage to Internal Audit will ensure better control and accountability of the field formations by FBR in discharging its responsibility as the prime revenue generating and collecting agency of the government, Directorate General of Internal Audit Inland Revenue added.