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ISLAMABAD: In the wake of discovering Rs400 billion scams in the form of bogus invoices for inflated input adjustments and sales tax refunds, the FBR authorities have placed a parameter-based Risk Management System (RMS) to stop massive leakages.
Chairman FBR Ali Arshad Hakeem told reporters on Thursday that they would implement a plan to increase the effective rate of sales tax by checking inflated input tax adjustments, wrongly claimed refunds, suppressed sales and under-valuation of sales tax by putting in place RMS.
However, another senior FBR official said that the RMS for input adjustments would become operational from November 15 after receiving monthly sales tax returns while the sales tax refund system would start working next month.
The RMS, developed by the FBR itself, will track down details by ensuring monitoring at a centralised level while sitting in Islamabad.
An influential and strong mafia exists within the FBR ranks and among the businessmen who have made hectic efforts to ensure decentralisation of the sales tax refund mechanism in order to fill their pockets. However, Hakeem, with his IT skills, made efforts to employ RMS to foil the bids of the mafia.
“Although, the GST rate is 16 percent, the effective rate of sales tax (output minus input) stands at 3.4 percent. By checking inflated input adjustments and flying or bogus invoices for refunds, if the FBR succeeds in increasing effective rate by one percentage point, then revenues can be increased by Rs150 to Rs200 billion,” said the official.
There are estimates that the FBR could plug leakages to the tune of Rs400 billion by placing an effective RMS. The FBR finalised the risk parameters to check the inflated tax adjustments.
In case of imported goods, it will be seen whether the customs data has supported the declarations made in the sales tax returns.
Through RMS, the FBR will search the discrepancies in the sales tax returns. The system will generate an electronic discrepancy report and the same will be electronically communicated to the taxpayer to correct the declarations.
The whole system of the RMS will operate under the supervision of the FBR Member Inland Revenue and large taxpayer units and regional tax offices. The FBR has made different levels of monitoring of sales tax to verify the discrepancies in the sales tax returns pertaining to input tax adjustments.
“The FBR will also publish two manuals on the input tax adjustments.
The first manual will guide registered taxpayers and the second manual will be for tax officials,” said the official.
The second RMS of refund would analyse the sales tax refunds on the basis of the risk based parameters. Refund claims will be filed after submission of sales tax returns from November 15, 2012.
As a result of these exercises the effective tax rate would increase which would increase overall sales tax collection, said the official. —Mehtab Haider
Chairman FBR Ali Arshad Hakeem told reporters on Thursday that they would implement a plan to increase the effective rate of sales tax by checking inflated input tax adjustments, wrongly claimed refunds, suppressed sales and under-valuation of sales tax by putting in place RMS.
However, another senior FBR official said that the RMS for input adjustments would become operational from November 15 after receiving monthly sales tax returns while the sales tax refund system would start working next month.
The RMS, developed by the FBR itself, will track down details by ensuring monitoring at a centralised level while sitting in Islamabad.
An influential and strong mafia exists within the FBR ranks and among the businessmen who have made hectic efforts to ensure decentralisation of the sales tax refund mechanism in order to fill their pockets. However, Hakeem, with his IT skills, made efforts to employ RMS to foil the bids of the mafia.
“Although, the GST rate is 16 percent, the effective rate of sales tax (output minus input) stands at 3.4 percent. By checking inflated input adjustments and flying or bogus invoices for refunds, if the FBR succeeds in increasing effective rate by one percentage point, then revenues can be increased by Rs150 to Rs200 billion,” said the official.
There are estimates that the FBR could plug leakages to the tune of Rs400 billion by placing an effective RMS. The FBR finalised the risk parameters to check the inflated tax adjustments.
In case of imported goods, it will be seen whether the customs data has supported the declarations made in the sales tax returns.
Through RMS, the FBR will search the discrepancies in the sales tax returns. The system will generate an electronic discrepancy report and the same will be electronically communicated to the taxpayer to correct the declarations.
The whole system of the RMS will operate under the supervision of the FBR Member Inland Revenue and large taxpayer units and regional tax offices. The FBR has made different levels of monitoring of sales tax to verify the discrepancies in the sales tax returns pertaining to input tax adjustments.
“The FBR will also publish two manuals on the input tax adjustments.
The first manual will guide registered taxpayers and the second manual will be for tax officials,” said the official.
The second RMS of refund would analyse the sales tax refunds on the basis of the risk based parameters. Refund claims will be filed after submission of sales tax returns from November 15, 2012.
As a result of these exercises the effective tax rate would increase which would increase overall sales tax collection, said the official. —Mehtab Haider
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