KARACHI, PAKISTAN: The Federal Board of Revenue’s (FBR) investigation into a massive Rs. 11 billion tax fraud involving a prominent cement manufacturer has reportedly been suspended following the unexpected transfer of key officers from the Internal Audit department.
The probe, which recently expanded to include three additional cement manufacturers, centered on fraudulent input tax adjustments claimed using fake coal purchase invoices. Investigators uncovered a network of 12 blacklisted companies facilitating these transactions and exploiting their “active” status on the FBR portal for credibility.
Key Developments:
- Initial Success:
- Investigators recovered Rs. 1 billion from the primary cement company under scrutiny.
- Expanded Investigation:
- The Directorate of Internal Audit directed the Large Taxpayers Office (LTO) Karachi to audit three more cement manufacturers suspected of similar practices.
- Fraudulent Scheme Details:
- Companies used fake invoices, withholding adjustments, and fictitious credit notes to inflate input tax claims.
- Required documentation, including purchase invoices, weight receipts, delivery challans, and bank payment proofs, has not been provided.
- Regulatory Violations:
- Violates Section 73 of the Sales Tax Act, 1990, which requires payments through proper banking channels.
Concerns and Implications:
- The sudden officer transfers have effectively halted the investigation, sparking concerns about transparency and possible interference by influential industry players.
- The case’s shelving raises questions about FBR’s commitment to combating tax fraud, despite initial progress in recovering evaded taxes.
The suspension of this probe highlights the challenges faced by regulatory bodies in pursuing cases involving powerful corporate entities. Without a clear resolution, the situation underscores the need for stronger institutional safeguards to ensure accountability and transparency in tax enforcement.
