KARACHI: A cybercrime gang, allegedly facilitated by current and former PRAL and FBR officials, has exploited dormant taxpayer identities to commit Rs. 81.434 billion fraudulent transactions from September 2023 to January 2024.
The tax fraud, allegedly facilitated by current and former officials of Pakistan Revenue Automation Limited (PRAL) and the Federal Board of Revenue (FBR), has exposed critical vulnerabilities in the country’s tax collection system.
The case came to light when Muhammad Sharif, a retired Armed Forces personnel and proprietor of Gravity Traders, filed a complaint with the Federal Tax Ombudsman (FTO). Sharif alleged that he was falsely accused of tax fraud involving fake transactions worth Rs. 81.434 billion with a GST impact of Rs. 14.658 billion for the tax periods from September 2023 to January 2024.
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According to Sharif’s complaint, Commissioner Zone-III illegally blacklisted his Sales Tax Registration Number (STRN) without proper notice or justification. The complainant maintained that he had filed “NULL” sales tax returns during the periods in question, indicating no sales or purchases were made.
Meanwhile, the FTO investigation revealed a complex web of fraudulent activities orchestrated by a cybercrime gang. The criminals reportedly exploited dormant taxpayer identities accessed from the FBR website, allegedly in connivance with current and former PRAL and FBR officials, to file bogus transactions without actual movement of goods or financial transactions as mandated by law. This fraud was initiated by filing Annexure C in sales tax returns, declaring fictitious supplies worth Rs. 81.434 billion with a GST impact of Rs. 14.658 billion.
The FTO identified two buyers as part of the scheme, who claimed substantial input tax credits against these fictitious supplies. Both had previously filed “NULL” returns but suddenly claimed large input taxes without the physical movement of goods or banking transactions.
Moreover, the investigation also highlighted procedural failures within the tax administration that allowed such fraudulent activities to occur unchecked. The lack of timely response to deregistration applications contributed significantly to enabling this massive tax fraud.
The FTO has recommended the cancellation of the blacklisting order against Muhammad Sharif due to a lack of evidence supporting the allegations besides conducting an in-depth investigation into the supply chain to identify ultimate beneficiaries who received refunds or adjusted taxes based on these fraudulent transactions.
Furthermore, the FTO also urged to implement improved oversight and accountability measures within tax administration systems to prevent future occurrences of such fraud.
This case has exposed significant flaws within the FBR’s administrative framework, raising critical questions about procedural integrity and accountability within the prime institution responsible for revenue collection.
It also underscored the vulnerability of innocent taxpayers to bureaucratic oversights and criminal activities beyond their control, calling for urgent systemic reform to safeguard taxpayer interests while ensuring accountability among those charged with managing public funds. Although the FBR is moving towards digitalization, addressing these cyber threats looming over traditional taxation processes has become paramount.
Copyright Business Recorder, 2024
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