ISLAMABAD: The Auditor General of Pakistan (AGP) has unearthed financial and procedural irregularities of over Rs133.5 billion in the affairs of the Federal Board of Revenue (FBR) Inland Revenue and customs during 2019-20, including inadmissible refunds issued under the prime minster's relief package.
According to the Audit Report on the accounts of the FBR (Inland Revenue and customs) for audit year 2020-21, as a result of audit, recovery of Rs133,501.88 million is pointed out, while Rs294.91 million has already been recovered.
The audit for fiscal year 2019-20 was conducted in 2020-21 by the AGP authorities on test check basis.
Two major issues faced by the audit teams were non-production of records and sudden changes in the jurisdiction of the taxpayers or field formations.
Out of total detected amount of Rs 133,501.88 million, audit observations of direct taxes stood at Rs 113,965.68 million.
Audit observations of indirect taxes totalled at Rs 7,856.08 million and customs Rs 11,680.12 million during 2019-20.
The AGP has strongly recommended legal proceedings against the tax officials responsible for sanction of undue refunds and also analyse the weaknesses in the internal controls lead to such lapses of inadmissible refunds under the FASTER and other systems.
The AGP has also found cases of excessive refund payments.
Seven field offices of the FBR sanctioned sales tax refund for Rs17.7 billion during 2019-20 including refund issued under Prime Minister's Covid-19 relief package, but post-refund audit was not conducted.
In most of the field formations, post-refund audit divisions were not functional.
Key audit findings revealed systemic issues in implementation of self-assessment scheme leading to short-collection of income tax of Rs80 billion.
The non-withholding of income tax by the prescribed persons resulted in revenue loss of Rs31.4 billion.
The short-levy of Super Tax caused revenue loss of Rs7.1 billion from 113 taxpayers in 12 field offices of the FBR.
The loss of revenue to the government due to double payment of income tax refund amounted to Rs487.98 million.
The issuance of refund without observation of prescribed law resulted in revenue loss of over Rs1 billion. The inadmissible/excess sanction of sales tax refunds caused revenue loss of Rs739.14 million.
The excess payment of sales tax refunds due to the inefficiency of the FASTER system caused revenue loss of Rs654.01 million.
On the customs side, the issues related to the assessment and valuation of imported goods caused revenue loss of Rs6.5 billion.
The blockage of government revenue due to the non-disposal of confiscated goods/vehicles has revenue impact of Rs3.1 billion.
On the sales tax side, systemic issues in implementation of self-assessment scheme leading to short-realisation of sales tax amounted to Rs1.5 billion.
Tax machinery's inability to collect "further tax" on supplies to un-registered persons caused revenue loss of Rs627.54 million, whereas, the inadmissible adjustment of input tax caused revenue loss of Rs739.14 million.
The under-valuation of imported goods caused revenue loss of Rs971.49 million during the period under review.
The AGP found that the neither the automation system of the FBR nor the functionaries of the field formations were able to flag and unearth the incorrect claim of tax credit.
The audit report added that the short-realisation of tax due to the discrepancy among figures of sales in income and sales tax returns amounted to Rs11.53 billion.
Copyright Business Recorder, 2021
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