ISLAMABAD: As part of a crackdown on huge businesses involved in multi-billion rupee sales tax fraud annually, the Federal Board of Revenue has made an extraordinary recovery of approximately Rs700 million from a well-known manufacturer.
According to reliable sources, Dawn has learned that another accused businessman involved in sales tax fraud is scheduled to pay back a staggering amount of Rs1.1 billion in the next few days.
On October 11, FBR Chairman Rashid Mahmood Langrial and Finance Minister Muhammad Aurangzeb made public the results of an investigation that shows significant companies and their managers have been involved in an annual sales tax scam of Rs3.4 trillion.
The investigation found that there was Rs227 billion in sales tax fraud in five different industries: steel, textile, drinks, batteries, and cement. The top 1% of income tax payers and the top 5% of sales tax payers who are suspected of not paying their true taxes to the exchequer would be targeted, according to FBR plans.
Per a study, large corporations embezzle Rs. 3 trillion from the government annually.
The Directorate General of Intelligence & Investigation, Inland Revenue, an implementing arm of the FBR, has been tasked with accelerating the crackdown on fraudsters who use illegal means to steal the money of other taxpayers as part of this plan.
In six different FIRs that were filed around the nation during the course of the last week, the tax intelligence agency detained eight people. It is believed that the individuals in custody are part of an organized crime group that establishes fictitious businesses to carry out fraudulent paper sales tax transactions.
The source stated, “After one manufacturer paid Rs. 700 million to the tax department voluntarily, we have withdrawn a FIR against him.” Recovery from the manufacturer attests to the involvement of large corporations in tax evasion.
In coordination with gangs, these firms were defrauding the exchequer of millions of rupees through sales tax and refund. They may also have issued phony invoices in lieu of actual purchases.
False accounts
This collusive arrangement operated by creating fictitious accounts and transit receipts without any real goods transfer. After that, they would assert fraudulent input or refunds along the entire supply chain.
Three chief financial officers (CFOs) and a procurement officer from two industrial companies are among the detained suspects. They are thought to have profited from fictitious or fraudulent invoices to the tune of Rs1.4 billion.
Two more people who were detained claimed to be owners of import-related companies, although it is believed that they had issued inflated and unlawful flying invoices totaling about Rs 200 million.
Similarly, the exchequer suffered a loss of hundreds of millions of rupees due to the fraudulent creation of dummy enterprises and the issuance of phony invoices by the two other suspects who were arrested. According to the sources, “we are anticipating a recovery of almost Rs1.1bn from the arrested accused and their beneficiaries in these six FIR cases in the coming days.”
Recently, organized crime groups engaged in sales tax evasion were discovered by the FBR. It is suspected that they assist leading companies in embezzling money from other taxpayers by generating fictitious invoices that appear authentic, with the intention of submitting them to the tax department for input tax adjustments.
The FBR mandated that firm CFOs sign an affidavit offering personal guarantees that no fraud had occurred in order to prevent sales tax fraud. Because of the large recoveries that have occurred from a few CFOs confessing to fraud in specific industries, this method has shown to be highly successful.
In the meantime, organized crime groups are stopping the crackdown by using their influence in the power corridor.
Due to the strain, the FBR has decided to postpone the deadline for filing sales tax returns and affidavits by one month.
During April of last year, the tax intelligence department has conducted crackdowns and discovered Rs136 billion in sales tax evasion and fraud. Of them, thieves were found to have stolen Rs.8631bn.
Thus far, the tax department has filed 56 FIRs against 475 individuals. Investigations against other suspects are still underway, but eighty-nine have been detained thus far.
