ISLAMABAD: A shocking case of tax fraud involving alleged manipulation and severe breaches of taxpayer data security has led to a staggering Rs84 billion in fabricated transactions and Rs14 billion in tax evasion within a few months.
According to official records and interviews, the Federal Tax Ombudsman (FTO) launched a comprehensive investigation following a complaint from a retired army officer. The probe uncovered a sophisticated scheme of organized tax fraud, allegedly facilitated by IT personnel at the Federal Board of Revenue (FBR).
The inquiry revealed that a company located in Zone-III, RTO-II, Karachi, reported sales tax returns for the periods from September 2023 to January 2024, falsely declaring supplies amounting to Rs81.434 billion and claiming GST of Rs14.658 billion. Various buyers then claimed substantial input tax against these fictitious transactions.
In a troubling turn, the Sales Tax Registration Number (STRN) was swiftly blacklisted without a proper investigation into the individuals exploiting the complainant’s identity. When summoned, FBR and Pakistan Revenue Authority Limited (PRAL) officials failed to provide the necessary documentation for Annex C, as mandated by STR-7.
Further investigation revealed intricate forward and backward transactions that pointed to individuals benefiting from this organized fraud. Allegedly, the fraudsters generated Rs1.625 trillion in fake supplies by misappropriating the sales tax account of a 79-year-old woman residing abroad, who had been filing nil sales tax returns.
Checks and balances designed to prevent such fraudulent activities, as stipulated by Rule 18(5) of Sales Tax Rules 2006, were reportedly disabled, resulting in significant revenue losses for the government.
“The investigation suggests that a network of cybercriminals, aided by current and former employees of PRAL and FBR with access to the computerized system, orchestrated this tax fraud,” the report stated.
The investigation also highlighted a complaint against the Commissioner of Zone-III, RTO-II Karachi, for wrongly accusing the complainant of tax fraud and blacklisting their STRN due to transactions amounting to Rs81.434 billion that were later deemed fictitious.
The complainant had been registered for sales tax since August 20, 2010, and alleged that the blacklisting of their STRN occurred without due process, including the lack of a proper notice or opportunity to contest the allegations.
In response to the complaint, the Revenue Division submitted an Excel sheet outlining the fraudulent supplies declared through Annexure C. However, FBR and PRAL remained unable to produce the requested documentation.
The FTO has directed the FBR to initiate legal action against those involved in the tax fraud, emphasizing the need for accountability and justice in this serious case.
