FBR fails to recover Rs170bn in fraud cases

Updated January 20, 2019

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Around 50,000 fraudulent transactions were detected in the real estate sector alone.
Around 50,000 fraudulent transactions were detected in the real estate sector alone.

ISLAMABAD: The tax department has managed to settle only 20 per cent of the total tax evasion and fraud cases involving billions of rupees during last year despite tall claims by the Federal Board of Revenue (FBR) to expand tax net and ensure deterrence.

Directorate General Intelligence and Investigation-Inland Reve­nue, the country’s premier anti-tax evasion and anti-fiscal fraud (income tax, sales tax and federal excise duty) investigation department, has detected tax evasion worth Rs170 billion throughout the country.

The official data reveals that the department, during the last year, sent more than 580 reports involving thousands of cases of contraventions, investigations and red alerts to more than 21 tax offices across the country.

An FBR official, while speaking to Dawn, said the directorate is scheduled to brief Finance Minister Asad Umar on the status of the cases next week. However, officials at the board were reluctant to share status on the cases involving high net-worth individuals detected last year.

The data on these cases reveals that around 50,000 real estate transactions worth approximately Rs600bn (as per deputy commissioner rate) have been identified but the market value of the transactions is likely to be much higher than the stated figure.

Around 50,000 fraudulent transactions were detected in the real estate sector alone

Of these, around 7,500 transactions involved individuals who were absent from tax rolls.

Similarly, cases involving individuals, who were also not on the tax rolls, purchasing vehicles worth more than Rs10 million were also detected.

“The number of such individuals are in thousands in the federal capital alone”, the official said.

All case reports were referred to the FBR’s regional tax offices (RTOs) and large taxpayers units (LTUs) for implementation and recovery.

However, recovery was much higher in cases that were pursued directly by the directorate.

FBR official said it was the responsibility of the commissioners at RTOs and LTUs to pursue these ‘readymade cases’, adding that a lack of action shows the scale of mismanagement at field offices.

It was also noted that most of the investigations involving revenue recovery were not even pursued. For example, more than 2,780 cases of gift schemes involving billions of revenue from tax returns of just one year were also pending with regional officers.

Moreover, the directorate issued 291 red alerts of violation of four SROs during July 7, 2017 to Dec 12, 2018 involving an amount of Rs26.8bn of possible tax evasions. Of these, 36 red alerts were issued to LTU Karachi involving an amount of Rs13.3bn, followed by 25 red alerts to Lahore involving Rs7.2bn and six alerts were forwarded to RTO Peshawar involving Rs1.5bn.

The remaining alerts were issued to RTOs/LTUs in Karachi, Lahore, Islam­abad, Sahiwal, Rawalpindi, Multan, Sialkot, Hyderabad, Gujranwala, Faisalabad, and Quetta.

The official said there is complete lack of coordination between the directorate, the RTOs and the LTUs that are charged with pursuing these cases while acknowledging that there are signs of improvement.

“I am positive that the trend of substantial growth in performance and achie­vement will continue in the coming years,” he said.

Another official at the board, however, said that there is also an element of corruption which is likely to delay pursuit of identified cases.

The investigations are focused on cases involving real estate, property developers, sugar, fertiliser, ghee/vegetable oil, commercial importers, wholesalers and distributors, steel, soap, chemicals, cosmetics, tobacco, educational institutions, hospitals, services, paper and paper board.

The Directorate of Intelligence and Investigation was created on Mar 25, 2011 to uncover cases involving tax evasion and fraud.

The department currently has seven directorate-level offices in Islama­bad, Lahore, Faisalabad, Multan, Karachi, Hyder­abad and Peshawar.

Published in Dawn, January 20th, 2019