Alvi turns down FBR’s plea against FTO decision

President orders recovery of amount paid on basis of fake invoices

ISLAMABAD:

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

Upholding the decision of the FTO, following its suo-moto action against sanctioning and issuing of sales tax refunds to fake RPs during 2012-13, the president directed the FBR to recover the amount paid on the basis of fake or flying invoices.

“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 his decision. Expressing displeasure over the scam, he said: “How can we afford not to recover and criminally charge the fraudsters”.

The president stressed full recovery of the embezzled money. “Instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people of Pakistan,” he said in his decision.

The FBR has filed 74 similar representations with the president against the FTO orders. Out of the 74 representations, 22 cases have been decided, while 52 are still awaiting adjudication. The FBR had allowed Rs875.277 million payment to fake RPs, of which a Rs223.312 Million has already been paid.

On April 27, 2020, The FTO directed the FBR’s chief commissioner for inland revenue at the Regional Tax Office in Karachi, “to investigate and identify the officials involved in registration of fake RPs” and initiate action against those responsible and submit compliance report in 45 days.

The FTO further directed the FBR to initiate appropriate action, including criminal proceedings leading to recovery of the amount swindled from the public exchequer through claiming inadmissible input tax and bogus refund.

However, the FBR challenged the FTO’s jurisdiction and filed a representation with the president, taking the plea that it could not issue such orders and rely on “interdepartmental correspondence of FBR”. However, the president rejected the FBR’s representation.

Earlier, an investigation conducted by the directorate general of the intelligence and 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 Rs18.519 million were made in 2012-13.

The president lauded the directorate general for issuing ‘red alerts’ and detecting the fraudulent activities in the FBR, and regretted that the “national exchequer was made to suffer colossal loss of revenue”.