ISLAMABAD: With the adoption of modern digital technologies, the Federal Board of Revenue (FBR) has unearthed a massive Rs11 billion tax fraud involving bogus firms registered with the tax machinery.

Two fake companies — Junaid Impex and Trade Zone — were identified as allegedly involved in the sale of duty-free coal to cement plants. Both companies have also opened accounts with local banks.

Fake sales tax invoices are used to supply local coal to cement factories. Coal, which is also used in the electricity sector, is an important component of the cement industry.

Pakistan’s cement sector requires an average of 13,000 tonnes of coal, and this demand is increasing. This demand is met through imports and domestic production, and the country’s domestic coal resources are estimated at 185 billion tonnes.

The Directorate of Internal Audit, Inland Revenue, Karachi, has lodged an FIR against the accused with Customs & Taxation Court, Karachi. “This is just the tip of the iceberg, as several fake companies are believed to be involved in coal supply to cement factories,” a senior tax officer told Dawn on Thursday.

The detection was made using the latest modern software introduced in the FBR as part of the government’s Digitalisation Policy. According to the tax official, powerful business groups and families are the end beneficiaries of the duty-free supply of coal.

Currently, the FBR provides sales tax registration to everyone due to the expansion of the tax base. However, the board could not distinguish between “paper transportation without physical movement of goods” and “real transactions involving actual physical movement of goods.”

Published in Dawn, August 4th, 2024