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FBR plans to give some incentives to filers



The Federal Board of Revenue (FBR) is planning to give some incentive, like tax credits, to new filers and existing filers of income tax returns to ensure timely return filing and encourage compliance. Sources told Business Recorder here on Tuesday that it is very difficult to conduct audit of each and every late-filer of returns.

At the same time, it is also not possible to carry out audit of all new return filers who filed returns after due date to avail benefits of filers. As there are issues to conduct audit of all returns filed after due date, there is a need to give some kind of incentive to new filers and regular filers in the form of tax credit for filing returns within the prescribed time period, they added.

The FBR is empowered to impose penalty on late filers of returns, but incentive of tax credit would encourage voluntary compliance.

The FBR is already facing a major challenge to conduct audit of all late filers of income tax returns and high volume of cases (7.5 per cent) selected for audit through risk-based selection process, in accordance with the joint report of World Bank (WB) and UK Aid on the Tax Policy and Tax Administration Reform Component, to improve business process of the FBR. One of the key recommendations of the report is to reduce the number of audits being conducted to a manageable level, dropping automatic selection of late filers.

The report said that significant challenges remain, particularly the high volume of cases selected for audit. In addition to the risk-based selection process, late filers are automatically selected for audit. While this practice penalises late filing, it creates a large volume of audit casework, as up to 10% of all filings are late. This practice should be abolished to free up resources for intelligence-based audit.

The report recommended the FBR to reduce the number of audits to be conducted to a manageable level, dropping automatic selection of late filers. Secondly, the staff should receive specific and timely training to implement the strategies to address the key priority risks.
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