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New IT system to restrain Sales Tax evasion

New IT system to restrain Sales Tax evasion

ISLAMABAD: The FBR has developed and implemented an integrated IT system known as Computerised Risk Based Evaluation of Sales Tax (CREST) for processing and assessing returns.

The system is now operational and running in the whole country. The objective is to have an effective, risk-based, automated compliance model that minimises wrongful adjustment of input tax and ensures correct payment of refunds.

The system initiates risk-based return processing by cross-matching each transaction in purchases, sales and payment. Firms’ reported values of effective rates, input-output ratios and value addition will be compared to sectoral weighted averages, thereby arriving at risk-based deviations, sources said.

Sources said that the input tax adjustments will be checked from entry into the economy to exit of goods to final consumer or for export. The different declarations such as of import, export, purchases and sales shall be made subject to verification through the system.

The refunds will only be processed on the basis of such purchases and sales as have been cleared through the system. The system provides no discretion to any officer dealing with the system, risk scores are calculated automatically, and the system will assign cases to officers for follow-up with no discretion on their part, thereby eliminating a key opportunity for corruption through consent between relevant officers and taxpayers.

The system will also maintain a log of the performance of the officers performing their functions in the field to enable effective monitoring of officers’ performance by their superiors. Efforts are underway to strengthen the system. An FBR action plan to remove glitches and to make it more user-friendly and effective will ensure a full-scale operationalisation by March 2014, sources added.