President tells off FBR for refunds on fake invoices

ISLAMABAD: President of Pakistan Arif Alvi came hard on the Federal Board of Revenue (FBR) on Friday, reprimanding the apex tax authority for releasing funds on fake and bogus invoices.

President Alvi rejected a representation filed by the FBR against the order of Federal Tax Ombudsman (FTO) in a case of bogus tax refunds worth over Rs14 million made to a fake registered person (RP).

The president directed the FBR to recover the amount paid on the basis of fake/flying invoices, while upholding the decision of Federal Tax Ombudsman (FTO) following its suo-moto action against the irregularities committed by the FBR field formations in registering, processing, sanctioning, and issuing sales tax refunds to fake RPs during the period 2012/13.

“It was surprising and shocking that FBR failed to investigate fake claims where refund had already been made in full connivance with FBR officials,” Alvi wrote in a decision statement. “How can we afford not to recover and criminally charge the fraudsters… the national exchequer was made to suffer colossal loss of revenue,” he said.

The president stressed recovery of the embezzled money, saying that instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people.

The FBR has filed 74 similar representations with the office of the president against the orders of FTO. Out of 74 representations, 22 cases have been decided while 52 are still awaiting adjudication. Furthermore, according to the relevant record, FBR allowed Rs875.2 million to be paid to fake RPs, of which a payment of R 223.3 million has already been made.

The FTO last year directed the Chief Commissioner Inland Revenue and Corporate Regional Tax Office Karachi to investigate and identify the officials involved in registration of fake RPs and initiate disciplinary/criminal action against those found involved and report compliance within 45 days.

The FTO in its decision further directed FBR to initiate appropriate action including criminal proceedings leading to recovery of amount swindled from public exchequer through claiming inadmissible input tax and bogus refund. Instead of implementing the directives of FTO, the FBR challenged its jurisdiction and filed a representation with the president taking plea that it could not issue such orders and rely on interdepartmental correspondence of FBR.

President Alvi rejected the FBR’s representation and made it clear that the body could exercise its power conferred under a section (9(1)) of the Federal Tax Ombudsman Ordinance 2000 to investigate irregularities in the department.

The investigations conducted by Directorate General of Intelligence & Investigation and Inland Revenue Karachi in case of ZA Exports – a fake RP with principal activity as manufacturer of iron and steel – revealed that bogus claims worth Rs18.5 million were made in tax period 2012/13 against irrelevant invoices. The directorate general was lauded for issuing red alerts and detecting fraudulent activities in FBR.