ISLAMABAD: Despite tall claims of expanding the tax net and creating deterrence against tax evasion and fraud, the Pakistan Muslim League-Nawaz (PML-N) has only managed to ensure recovery in 39pc of cases worth billions of rupees.
Gaps in the pursuit of tax evasion cases were discussed at the recently held Chief Commissioners’ Conference, where most top tax officials were not aware of the fate of cases against high net-worth individuals, including those named in the Panama Papers, which were detected over the past four years.
The Directorate of Intelligence and Investigation-Inland Revenue was created on March 25, 2011 to uncover the astounding level of evasion and tax fraud in the economy. The department has seven directorate-level offices in Islamabad, Lahore, Faisalabad, Multan, Karachi, Hyderabad and Peshawar.
Official data shows that the directorate has unearthed more than 2,300 high-potential cases, involving an amount of Rs930bn. These cases were identified and investigated between 2013 and 2017.
All case reports were referred to FBR’s regional tax offices (RTOs) and large taxpayers units (LTUs) for implementation and recovery. But the Chief Commissioners’ Conference was informed that only 900, or 39pc of cases, were pursued. However, recovery was very high in all cases that were detected and pursued directly by directorate.
An official privy to developments told Dawn that it was the responsibility of the RTOs and LTUs to pursue these ‘readymade cases’, adding that a lack of action on these cases spoke volume of the mismanagement in field offices.
“We have seen that many potential cases were kept on the back burner,” the source said.
Separately, the directorate also identified 2,785 cases of gift schemes, involving a potential Rs102bn revenue from tax returns of just one year. These cases are not part of the 2,300 mentioned earlier.
However, the official said these cases were also referred to RTOs and LTUs for implementation. If the department were to scrutinise tax returns beyond the past four years, the number of people of using gift schemes for tax evasion purposes may be in the several thousands, the official added.
But, according to a tax official, the directorate was silent on data regarding tax evasion cases unearthed between 2011 and 2013. “It is not clear whether the record is missing or if it was deliberately left out,” the official added.
According to a source, there is a complete lack of coordination between the directorate and the RTOs and LTUs that are charged with pursuing these cases.
The government also has tasked the directorate to probe the cases of those named in the Panama Papers. After initial investigation and dispatching of notices to 344 persons, reports were compiled on the basis of information received from all these individuals and all the cases were transferred to the concerned RTOs and LTUs for further action. More than 100 cases were transferred to Karachi and 85 cases were sent to Lahore.
Dawn approached the office of FBR’s member (operations) as well as the Directorate of Intelligence and Investigation-Inland Revenue to ascertain the status of cases instituted in the wake of the Panama Papers leak, but no reply was forthcoming.
Another senior FBR official told Dawn that the directorate had lost sight of its objective. The mandate of the office was to probe and analyse tax evasion sector-wise, but it had become reliant on recovery in individual cases.
Although he did not rule out the element of corruption, which could lead to delays in the implementation of identified cases, another source said that the directorate had performed well over the past few years, despite human resource and other limitations.
Published in Dawn, August 13th, 2017