ISLAMABAD: The Federal Board of Revenue (FBR) has uncovered a substantial tax fraud amounting to Rs11 billion, linked to fictitious companies exploiting tax loopholes. The fraud involves two bogus firms, Junaid Impex and Trade Zone, which are accused of fraudulently selling duty-free coal to cement plants. These companies have also opened accounts with local banks.
The scheme used fake sales tax invoices to supply local coal to cement factories. Coal, a crucial resource for both the cement and electricity sectors, is essential for Pakistan’s cement industry, which demands an average of 13,000 tonnes of coal. This demand is met through both imports and domestic production, with Pakistan’s coal reserves estimated at 185 billion tonnes.
The Directorate of Internal Audit, Inland Revenue, Karachi, has filed a First Information Report (FIR) against the suspects with the Customs & Taxation Court in Karachi. According to a senior tax official, this case represents only a fraction of the problem, with many other fraudulent companies likely involved in similar schemes. “This is just the tip of the iceberg,” the official revealed.
The fraud was identified through advanced software implemented by the FBR as part of its Digitalisation Policy. The tax official indicated that influential business groups and families are likely benefiting from the duty-free coal supplies. While the FBR has expanded its tax base by offering sales tax registration to more entities, it has struggled to differentiate between “paper transactions” and genuine transactions involving physical goods.
