The Federal Board of Revenue (FBR) remained unsuccessful in implementing a key recommendation proposed by the Federal Tax Ombudsman (FTO) for taking action against high-ranking officials involved in tax evasion. The FTO observed that the Pakistan Revenue Automation Private Limited (PRAL) and the Investigation and Intelligence (I&I) appeared to have failed to devise an effective automated online system for registered taxpayers.
The complicity and collusion of rogue tax employees with outside criminal elements was also not ruled out. The FTO had proposed restructuring the PRAL and transforming it into a proactive sales tax body for the prevention and detection of fraud and setting up a task force to investigate all aspects of sales tax evasion. The directions were given in a public interest on complaint No 390 titled Waheed Shahzad Butt vs Revenue Division secretary. According to sources, the FBR had neither preferred representation before President Arif Alvi nor did it file any review before the FTO.
However, despite the lapse of reasonable time, the implementation on the recommendations forwarded by the FTO remained unimplemented and no action was taken against any senior official. The FTO had directed the FBR to set up a task force to investigate all aspects of sales tax fraud and propose effective countermeasures. The revenue board had also been asked to review the I&I staffing policy and ensure that only highly qualified professionals with demonstrated expertise in uncovering cases of online crime be assigned the key investigation roles.
During the investigation, the FTO found that tax evaders in the country had become adept at targeting the online system of claiming input tax credit. It was observed that lack of sufficient pre-registration checks were a critical reason for the criminal elements to get dummy entities registered with the relative case. The complainant pointed out that it was not a simple case of hacking into a system. It was noted that the deliberate creation of dummy entities illustrated that the fraud was not possible without the insiders’ involvement.
According to the FTO’s decision, both the PRAL and the I&I responded to the points raised by the complainant. It claimed to have created the right tools to detect tax fraud within the e-FBR system.