FBR pleas snubbed in Rs 1.2b bill scam

By Uzma Zafar

ISLAMABAD: President Dr Arif Alvi on Sunday disposed of 42 representations of the Federal Board of Revenue (FBR) in cases of bogus sales tax invoices, worth over Rs 1.2 billion.
The FBR had filed the representations with the President of Pakistan assailing the orders of the Federal Tax Ombudsman (FTO) passed in suo moto cases, in which bogus Sales Tax Refunds were reimbursed fully or partially by the delinquent officials of the FBR to the fake claimants. The huge scam was unearthed by FBR’s Directorate General Intelligence & Investigation-Inland Revenue and the Red Alerts were issued to the concerned field formations. However, no action was initiated against the FBR officials and the fake claimants.
The FTO on taking suo moto notice of the matter had issued directions to the FBR to investigate and identify the officials involved in verification of the registered persons (RPs) and initiate a disciplinary action.
In pursuance of the FTO’s recommendations and also the previous orders of the President of Pakistan passed in similar cases, the FBR constituted six fact-finding inquiry committees to deal with 130 suo moto cases relating fake refund claims. The Terms of Reference (ToR) of the committees were meant to identify the wrong-doings and involvement of officials in each case, and fix responsibility. Also, these committees were tasked to prepare a draft charge sheet and statement of allegations with respect to each official and submit a report to the Board within 30 days.
President Alvi, in view of the findings of the committees, disposed of the representations of the FBR pertaining to the cases in which full or partial refunds were paid fraudulently. He directed the FBR for submission of a monthly implementation report to the Federal Tax Ombudsman’s Secretariat till the completion of the action on each case.
He also ordered to afford an opportunity of show-cause and hearing to the official in case of any departmental action proposed against him, to satisfy the requirement of due process and the principles of natural justice.
Earlier in May, FBR had initiated action against fake invoices in the steel sector.
FBR had written letters to chief collectors of Customs Appraisement and Facilitation, in Karachi, Lahore, Islamabad and Quetta, asking them to submit reports on illegal businesses by May 4. FBR said that misdeclaration of imported steel was not only hurting the taxpaying local industry but also denting the national exchequer.
In April this year, Pakistan Association of Large Steel Producers (PALSP) in a letter to Special Assistant to Prime Minister (SAPM) on Revenue Dr Waqar Masood and the FBR had complained that the practice of taking claims through fake and flying sales tax invoices was resulting in a loss of billions of rupees to the exchequer every month as well as destroying documented steel manufacturers who paying government taxes ethically.
According to the association, the documented and revenue contributing sector was likely to shrink further if tax evasion continued. “The menace of fake invoices that remains unchecked is going to result in the closure of the documented steel sector and will discourage future investments in the sector,” PALSP Secretary General Wajid Bukhari had said.
“According to our understanding, the FBR has a standard operating procedure (SOP) to deal with cases that involve fake invoices and the directorate general of internal audit of Inland Revenue (IR) has powers to check such cases in field formations across the country,” he added. The association has appealed to the apex body to regulate the problem by mutually working with the association.
It has suggested to the FBR to identify the fake invoices and extended its support in finding a way to deal with the problem in addition to bringing structural changes in the sales tax law to make it impossible for any taxpayer to use flying invoices.