The Federal Board of Revenue (FBR) has recently unveiled an ambitious plan to significantly ramp up its audit activities, particularly targeting non-filers. This initiative is designed to broaden the tax net and enhance revenue collection.
The Need for More Audits
Historically, the FBR has faced challenges in conducting comprehensive audits due to a shortage of skilled auditors. The limited audit capacity often resulted in a relatively small number of tax returns being scrutinized. Recognizing this bottleneck, the FBR has decided to bolster its audit force.
A Data-Driven Approach
The FBR’s new audit strategy is heavily reliant on data analytics. The tax authority has gathered extensive data from various sources, including the National Database and Registration Authority (NADRA), banks, and other government departments. This data is then fed into sophisticated software to identify potential non-filers and those who may be underreporting their income.
Key steps involved in the process:
- Data Collection: The FBR collects data from multiple sources to create a comprehensive database of taxpayers.
- Data Analysis: Advanced software is used to analyze the data and identify potential non-filers or those with discrepancies in their tax returns.
- Issuance of Notices: Taxpayers identified through the data analysis are issued notices, requiring them to file their tax returns or provide an explanation for any discrepancies.
- Audits: Selected taxpayers are then subjected to detailed audits to verify their income and tax liabilities.
Hiring More Auditors
To carry out these increased audits, the FBR has issued a request for expressions of interest (EOI) to hire additional auditors. The new hires will be equipped with the necessary skills to analyze complex financial data and conduct thorough audits.
World Bank’s Role
The FBR’s initiative is being supported by the World Bank through its Revenue Generation Program (RGP). The World Bank’s financial assistance will help the FBR to hire and train the required staff and implement the necessary technology.
Impact on Taxpayers
This aggressive audit plan will have a significant impact on taxpayers, particularly those who have not been filing their tax returns or who have been underreporting their income. Non-filers can expect to receive notices from the FBR demanding that they file their returns and pay any outstanding taxes.
Key takeaways for taxpayers:
- Stay compliant: Ensure that you are filing your tax returns accurately and on time.
- Maintain records: Keep detailed records of your income and expenses.
- Be prepared for an audit: If you receive an audit notice, cooperate fully with the tax authorities.
