FBR arrests company CFOs and fraudsters in major sales tax evasion scheme

Pakistani authorities have arrested five senior executives, including a prominent fraudster, in a sweeping crackdown on businesses involved in sales tax fraud, the Federal Board of Revenue (FBR) said on Wednesday.

The arrests are part of a broader government initiative to clamp down on companies and individuals benefitting from fake and fraudulent invoices, causing massive losses to the national exchequer.

According to an FBR statement, the arrests were carried out by regional directorates of Intelligence and Investigation, Inland Revenue, targeting individuals engaged in creating chains of dummy businesses.

Among those arrested were four Chief Financial Officers (CFOs) accused of tax fraud, as well as a notorious fraudster known for orchestrating complex schemes to avoid tax liabilities.

In Hyderabad, officials apprehended the CFO and Purchase Officer of a prominent Lahore-based battery manufacturer for allegedly claiming fake input tax on lead.

This operation, which was conducted with assistance from the Lahore Directorate, exposed a fraudulent scheme that resulted in over PKR 1 billion in losses to the national exchequer.

An FIR had been lodged against the company’s executives, who now face charges of abetment and connivance in sales tax evasion.

In a separate intelligence-based operation in Faisalabad, authorities arrested the CFOs of two sister concerns and a major textile unit for their involvement in claiming fake input tax on coal.

This fraudulent activity, led by a gang of tax evaders, caused revenue losses running into hundreds of millions of PKR.

In another significant development, the pre-arrest bail of Taswar Shahid, a leading figure in multiple sales tax fraud cases, was rejected by a court. Shahid was arrested outside the courtroom and is believed to be a key member of a gang that created fake sales tax inputs used by end users and beneficiaries, causing billions in revenue losses.

The arrests are part of a nationwide operation launched by the Finance Ministry and FBR to curb the widespread use of fraudulent invoices in the business sector.

Last week, Finance Minister, the Chairman FBR, and the Director General of Intelligence and Investigation, Inland Revenue, held a press conference, announcing a crackdown on beneficiary businesses and top executives involved in tax malpractices.

The FBR has vowed to continue its efforts to enhance tax compliance and punish individuals and companies defrauding the tax system.

These recent arrests, which target high-level executives and fraudsters alike, signal the government’s growing resolve to combat tax evasion and recover the billions lost to the exchequer each year.

Earlier, Finance Minister Muhammad Aurangzeb has revealed that Pakistan faces Rs3,400 billion in tax fraud and evasion, prompting a major crackdown on sales tax evaders.

During a press conference with the Chairman of the Federal Board of Revenue (FBR), he highlighted large-scale tax fraud across sectors like cement, batteries, beverages, textiles, and iron and steel.

Aurangzeb noted that fraudulent use of the input tax adjustment system is a key issue, with many companies submitting false tax returns.

The minister warned that those involved in sales tax evasion could face arrests and lengthy prison sentences, with penalties ranging from five to ten years for major frauds.

He stressed that the government will take decisive action to improve tax collection and address the widespread tax evasion.

FBR Chairman Rashid Langrial confirmed that CFOs of companies will be held accountable for signing fraudulent tax returns.

He advised CFOs to seek legal advice before signing tax documents and assured that arrests will begin soon, based on solid evidence. The government plans to launch a significant crackdown in the coming weeks to combat this rampant fraud.