The Federal Board of Revenue’s (FBR) top intelligence agency, the Directorate General Intelligence and Investigation Inland Revenue (l&I-IR), has conducted a significant investigation into sales tax fraud in various key sectors of the Pakistani economy. This fraudulent activity spans multiple sectors, including coal, oil, ghee, textile, paper and board, steel, as well as lead, lead waste, and scrap.
Over the course of a four-month investigation from May to August 2023, the l&I-IR has revealed that these fraudulent activities resulted in illegal adjustments of input tax worth a staggering sum of nearly PKR 70 billion. This indicates the magnitude of the fraudulent tax adjustments that have been taking place within these industries.
As a response to these findings, the intelligence agency has taken decisive action against the culprits behind this extensive tax fraud. The crackdown occurred in major cities across Pakistan and has led to the apprehension of more than 30 individuals involved in these fraudulent schemes.
What’s particularly concerning is that tax fraud has been pervasive across a range of critical sectors, including coal, iron and steel, textile, cotton ginning, lead waste and scrap, copper wire, and more. The fraudulent practices extend to a variety of industries, suggesting that the issue is not limited to a specific sector but is rather a broader problem that demands attention.
Furthermore, the Directorate General of l&I-IR has not only targeted those directly involved in tax fraud but has also apprehended tax lawyers and advisers who actively facilitated and enabled these fraudulent activities.
In essence, the Directorate General of l&I-IR has launched an intensive enforcement campaign to combat these illegal tax practices and fraudulent activities. This effort is aimed at curbing the widespread problem of illegal input tax adjustments and the issuance of fake or “flying” invoices under the Sales Tax Act of 1990. By taking these measures, the goal is to establish a fair and just tax environment that provides genuine taxpayers with a level playing field.