The Directorate General of Intelligence & Investigation-Inland Revenue has arrested one CFO from a battery manufacturing firm in Lahore and four Chief Financial Officers (CFOs) from textile companies in Faisalabad. They are facing charges related to their involvement in sales tax fraud.
The Large Taxpayer Offices have already met with numerous CFOs at LTOs to inform them of potential arrests if there is proof of tax fraud or unlawful tax credits/adjustments.
One of the top fraudsters involved in creating chains of fake businesses and four members of top management of end users/beneficiaries (CFOs) accountable for the tax fraud causing billions of dollars in sales tax loss to the national exchequer were among the five individuals apprehended nationwide by the Regional Directorates of Intelligence & Investigations Inland Revenue.
High-Profile Arrests in Billions-Rupe Sales Tax Fraud Case
The Directorate of Intelligence & Investigation-Inland Revenue, Hyderabad, has arrested the Chief Financial Officer (CFO) and Purchase Officer of a prominent Lahore-based battery manufacturer on charges of abetment/connivance in Sales Tax fraud, specifically for claiming fake input tax on lead. This arrest is being made in response to a registered FIR involving billions of rupees in sales tax fraud. The Directorate Lahore helped the Hyderabad team with its intelligence-based operation. The individuals arrested are solely responsible for a revenue loss of over one billion rupees.
Officials from the Directorate of Intelligence & Investigation-Inland Revenue in Faisalabad have detained the chief financial officers (CFOs) of two related companies and a prominent textile unit in the city. They are facing charges of assisting and facilitating sales tax fraud through the submission of false input tax claims for coal. Additionally, the fraud committed by a group of individuals has cost the national exchequer hundreds of millions of rupees in lost revenue.
An FIR had already been filed against the sellers, recipients, con artists, and other people involved.
Court Rejects Bail; Major Fraud Figure Arrested
In another development, the Court dismissed accused Taswar Shahid’s pre-arrest bail, which was nominated in numerous FIRs, on Monday. From outside the courtroom, he was subsequently taken into custody. He is one of the leaders of the gang that runs fake and dummy units to make fake sales tax input. This is used by the end users or recipients, who lose billions of dollars for the country.
In keeping with FBR’s enforcement efforts to improve tax compliance, these arrests follow a nationwide drive on the organized mafia and their sales tax fraud beneficiaries.
The CFOs of large textile companies have never been arrested before. According to sources, the FBR has requested that the CFOs pay both the main sum and any additional taxes or penalties that are owed, totaling billions of rupees, in order to avoid prosecution.
According to sources, criminal charges have been brought against the chief financial officers of the companies that signed off on fraudulent sales tax reports.
The Federal Board of Revenue has already found and collected proof of tax fraud in several industries. These include 11 cases in the battery industry, 897 cases in the iron and steel industry, and 253 people who got money from false input claims on the purchase of coal. There are a lot of cases that need to be prosecuted for sales tax theft, and they include cases from all of the above areas.
Additionally, it is believed that people in the supply chain in these cases have cheated the tax system by changing input tax changes, debit and credit notes, and other tools. A sum of Rs. 227 Billion has been stolen in sales tax.
A huge crackdown on law enforcement has been planned and will happen in the next few weeks. The finance minister also said that sales tax theft is illegal and will be punished severely by the law, including arrest and jail time of up to 10 years, as well as heavy fines and penalties. Directors, CEOs, CFOs, and other authorized persons of the company would also be subject to legal action, as would the owners of sole proprietorships and partners in firms (associations of persons).
Tax evasion is very common, so this past financial year, enforcement measures like arrests, filing of criminal cases, and improvements to the reporting system were stepped up. As a result, there was a big drop in the claim of fake input tax across all sectors. However, despite these attempts, there is still a lot of evasion. More strict enforcement steps have been planned to stop this kind of evasion.
The FBR discovered that only 14 percent of 300,000 producers are registered, despite Rs. 3,400 billion in tax evasion uncovered in Sales Tax. Many registered firms also engage in turnover misreporting, excessive input tax claims, and the use of fraudulent and flying invoices.
