In the Income Tax Department, according to reports issued by FBR, fake refunds of million of rupees have been issued recently. It is strange that on the one hand tall claims about improvements in integrity levels under the on-going reforms have been made and on the other blatant acts of fraudulent refunds issuance have increased manifold.
The following details (reported verbatim from newspapers) about major refund scams unearthed in Karachi, Lahore and other parts of the country during the last few months are a slap on the face of FBR high ups who have been misleading the nation by claiming that "wonders" have been achieved under the so-call Tax Administration Reforms Programme (TARP):
"It has been found that income tax officials issued illegal refunds on fake withholding tax claims filed by the so-called 'government contractors'. The income tax officials, headed by an Inspecting Additional Commissioner, issued refunds on bogus tax deduction claims, in violation of law. The agency is working out the revenue loss caused by the gangs, but initial reports showed huge loss to the national exchequer.
FBR sources said that the seriousness of the scam is evident from the fact that the 'contractors' had tried to show themselves as registered contractors of sensitive government departments. There are apprehensions that the gangs would try to tamper the tax record to hide the evidence of the bungling committed by the income tax officials. The modus operandi of the whole scam was chalked out by this senior income tax official, having reputation of committing frauds, and has been famous in Punjab.
The mastermind has links with a well-knit mafia for committing tax frauds. If the concerned senior income tax official is not transferred from Bahawalpur, he would definitely change the entire record which would hamper the on-going investigation, DG, Intelligence, opined.
He further pinpointed that Income Tax Circle Ahmedpur East, Bahawalpur, took the lead in issuing illegal refunds to fake government contractors. Beside DG, Intelligence, the Directorate General of Inspection and Internal Audit has also confirmed that serious irregularities have been committed by the income tax officials in Bahawalpur Zone to issue bogus refunds. The initial investigation, conducted by DG, Inspection, unearthed this mega fraud. The directorate has started thorough investigation of the record to check the quantum of refunds issued in this case.
In this connection, the concerned Zonal and Regional authorities have been contacted by the investigators. FBR sources said that one of the interesting reasons for committing massive tax fraud by the involved tax official in Bahawalpur is that he has three wives and many kids. It is almost impossible to breed three families on government salary and it seemed that the concerned official was involved in tampering of record and misstatements and had committed other irregularities to earn illegal money."
-- "The Federal Board of Revenue has unearthed a scam in Lahore involving a senior income tax official (Grade-20), who allegedly issued bogus refunds of over Rs 103 million in 39 cases on forged documents during 2003-2007. FBR sources in the Directorate General of Intelligence and Investigation revealed that the official has not only tampered the tax record in certain cases, but also grossly violated rules and regulations particularly Income Tax Ordinance 2001 to facilitate the illegal refunds.
The tax fraud in the Companies Zone, Lahore, appeared to be committed on the same pattern of Companies Zone, Enforcement Zone-B Karachi. The astonishing part of the story is that the corrupt official has been given new assignment to work as Member Tribunal to settle income tax-related disputes of the taxpayers. He also issued illegal refunds during his appointment on other positions in Lahore, showing serious loopholes in the system to check the wrongdoings of senior tax officials in the field formations. During 2003-2007, the official used different techniques to issue illegal refunds in several cases without any check by any agency.
It has been found that the accused official during his appointment as Commissioner Income Tax (CIT), Companies Zone-II, Lahore was involved in corruption. Details collected by an intelligence agency revealed that the official deliberately issued bogus refunds of Rs 19.211 millions to an electronic company in 2003, 2004 and 2005. The refunds were issued despite the fact that tax record was tampered by changing figures/important documents.
The examination of record also showed concealment of basic facts of the case and flouting of statutory provisions and legal requirements. The official had deliberately drafted wrong cases showing misstatements to give legal backing to the bogus refunds. In another case, the official issued bogus refund of Rs 33.99 million to a company for the tax year 2004.
The objections raised by the lower income tax officials were ignored to issue bogus refunds. According to sources, the accused official was also given additional charge of Commissioner of Income Tax Zone-A, Lahore for 2-3 weeks in June, 2007. During this period, illegal refunds were issued in 37 cases involving over and above Rs 50 million by committing serious violations of law.
In 37 cases violations were committed in such a bold manner that even basic reading of documents showed clear violations and misinterpretation of law. The Board has initiated disciplinary proceedings against the official under the Removal from Services (Special Powers) Ordinance 2000, the sources added".
-- "The Federal Board of Revenue (FBR) has decided to suspend three senior income tax officials of Karachi, who sanctioned Rs 138.460 million fake refunds on bogus tax deduction certificates issued by some stock exchange members.
FBR has constituted a high-level committee headed by Mukhtar Ahmed Gondal, Director General, Large Taxpayer Unit (LTU) Karachi, to probe this mega tax fraud. The Director General Intelligence and Investigation had recommended to the Board that immediate action be taken against a former commissioner of Income Tax, Companies Zone-IV, Karachi; ex-Additional Commissioner Companies Zone-IV, Karachi and Ex-DCIT, Companies Zone-IV, Karachi.
The FBR would also obtain tax record from Regional Tax Office (RTO), Karachi, for fixing responsibility on PRAL, stock exchanges and identification of banks. On the findings of the DG Intelligence, the FBR has initiated disciplinary proceedings against the suspected income tax officials. The DG Intelligence had apprehended that Board's immediate attention is needed in this regard, otherwise its negative fallout might cause irreparable loss in meeting the revenue target.
In view of seriousness of the case, the board is under the process of suspending these three officials. The constitution of committee would help in eradicating unnecessary delay in scams of similar nature. According to FBR sources, the former officials of Enforcement Zone, Companies-IV Karachi used illegal 'tax deduction certificates' issued to some stock exchange brokers for claiming refund.
The Vigilance Wing of DG Intelligence detected that the three ex-income tax officials of Companies Zone-IV caused huge loss to the exchequer by issuing bogus income tax refunds to hundreds of individuals during 2006-07. The involved officials issued illegal refunds to individuals who were out of the Companies Zone-IV, Karachi, jurisdiction. FBR sources said the illegal refunds were issued in such a manner that all the ingredients of an organised tax fraud were properly managed.
The DG Intelligence had detected that refunds were issued on the basis of certificates u/s 164 of Income Tax Ordinance, 2001 to selected brokers/individuals for trading in shares. Under the law, members of the stock exchanges are not authorised to issue such certificates. The individuals whom refunds had been issued did not fall under Enforcement Jurisdiction of Companies Zone-IV, Karachi.
The National Tax Numbers (NTNs) of these individuals are in serialised sequence, pattern of tax years is identical, refund cheque numbers are in serialised sequence, dates of refunds are identical, whereas members/brokers issued unauthorised certificates to individuals/brokers under section 164. Interestingly, refunds have been issued to individuals, who are residents of other cities/stations and their particulars do not match with the NTN Master Index".
The increased numbers of refund scams and unfettered tax evasion confirm that nothing has changed. It is a sad reflection on FBR's top management. The corrupt and resourceful are still holding key posts and are issuing refunds on forged documents.
They are still encouraging the profit-hungry traders and businessmen not to pay taxes but just give them their due "share". In the morning they sit in offices and in the evening are rendering "professional" services [on muk-muka (settlement) basis]. It is beyond any doubt that the prevalent mass-scale evasion of taxes is not possible without the connivance of tax administrators (administrators is more appropriate term for them). They are actually national traitors and not tax administrators.
The tax-evaders and tax administrators together constitute a mafia that has made Pakistan a haven for tax dodgers and plunderers of national wealth. The tax officials holding key posts are directly connected with these people. They design and get implemented policies for "mutually-beneficial" relations between them and the whole nation is a silent spectator. The outcome is a total destruction of our socio-economic system (we are witnessing ever-increasing rich-poor divided, chaos and lawlessness).
The rich comprising mighty politician-cum-industrialists, tax evaders, drug barons and corrupt officials in civil-military bureaucracy are ruling Pakistan. The policies of appeasement towards politician-cum-industrialist, unscrupulous traders and businessmen are obviously not without any personal interest.
The policy-makers are properly "compensated" for this kindness. In such circumstances, tax scams can only be countered through a permanent commission, representing the people of Pakistan, which should probe the cases and release its report in the Press on monthly basis.
(Concluded)
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