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Pakistan Tax Authority Issues Audit Hit List

Thursday, April 12, 2018

Pakistan's Federal Board of Revenue has released the financial and compliance parameters it intends to use to select taxpayers for audit for the 2016 tax year.

Taxpayers falling within these parameters will be chosen at random for audit. Once chosen, a taxpayer will be exempt from selection on a random basis for the following two years.

The parameters the Board will have regard to when selecting taxpayers for audit in relation to sales tax and federal excise are:

  • declining supply value of over 10 percent in the prior year;
  • a consistent decrease in output tax/input tax ratio over the last three years;
  • a decrease in the ratio of taxable supplies to total supplies by 10 percent or more as compared to the previous year;
  • non-filing of returns or filing of returns with no tax to pay for the past six months;
  • manufacturers showing value addition of less than 10 percent;
  • more than 30 percent of purchases or sales being made to or from unregistered persons; and
  • an increase in carryforward of input tax and a reduction in sales by a margin of 10 percent.

The parameters for income tax have not been disclosed.

Selection of taxpayers for audit is scheduled to start shortly. The Board's audit policy is available on its website.