ByIslamabad, Pakistan:In a move aimed at enhancing tax enforcement, Federal Board of Revenue (FBR) has granted tax officials the authority to enter taxpayers’ premises unannounced for audits and surveys. This empowerment, detailed in Section 175 of the Income Tax Ordinance, 2001, allows tax officers to conduct thorough inspections without prior notice to ensure tax compliance.
Section 175 provides officials “full and free access” to enter taxpayer premises, examine financial records, and conduct detailed audits. Under these provisions, tax officers can review both physical and digital records to assess tax liabilities. This new authority, which marks a significant shift in the FBR’s enforcement approach, aims to curtail tax evasion and improve compliance within Pakistan’s tax framework.
According to FBR, tax officials now have extensive powers, including access to sensitive documents, accounts, and computer systems. They may extract or copy documents as needed, and in certain situations, even impound physical and digital records to facilitate further investigation. This right to impound extends to digital devices, as tax officers can seize computers and data storage devices, highlighting the FBR’s focus on modernizing its audit approach to counter tax evasion effectively.
Furthermore, tax officials are authorized to inventory articles found on the premises, underscoring the depth of these inspections. The FBR clarified that these powers may be exercised without prior notice, a move intended to prevent potential tampering with financial records before inspections. However, this also raises privacy concerns among taxpayers, as officials are permitted entry and access at any time, as deemed necessary by the Commissioner or designated officers.
The law also provides for the inclusion of third-party experts, including valuers and other professionals, authorized by the FBR Commissioner to assist in these audits. This provision ensures that tax audits are comprehensive and that experts can help in cases where intricate financial assessments are required.
Taxpayers are legally obliged to cooperate with FBR officers during these inspections. Occupants of the premises, whether the owner, manager, or other responsible parties, must provide “reasonable assistance” to facilitate smooth audit proceedings. FBR has also assured that any seized items will be formally documented, signed for, and safeguarded under supervision to protect taxpayer rights.
Additionally, the FBR’s new regulations allow taxpayers access to any seized items for supervised examination and copying. Should any materials be damaged or lost, the law mandates compensation to the taxpayer, providing a measure of accountability for tax authorities during these audits.
One of the key aspects of Section 175 is its ability to override other laws related to privilege or public interest concerning access to premises or document production. This emphasizes the government’s prioritization of tax law enforcement over certain confidentiality protections in order to ensure compliance across the board.
While this expanded authority is expected to enhance transparency and boost tax revenues, the potential for misuse of power remains a concern among taxpayers. Nonetheless, FBR officials express optimism that increased enforcement and transparency will strengthen Pakistan’s economic stability by ensuring that all entities meet their tax obligations.
