FBR’s Major Unsettled Tax Evasion Cases Are Causing Massive Losses: FTO

Federal Tax Ombudsman (FTO) has disclosed that the important cases of tax evasion, detected by the Directorate General (DG) Broadening the Tax Base (BTB) Federal Board of Revenue (FBR), have not been finalized by the FBR’s field formations, causing revenue loss to the national kitty.

According to a special study conducted by the FTO, the in-house analysis revealed that FBR and its dozens of field formations maintain an organized web portal, rich data centre, exhaustive databases, elaborate and comprehensive operational software and house a full-fledged home-grown IT support system i.e., Pakistan Automation Limited (PRAL).

However, neither FBR Headquarters nor any single field formation maintains any IT-based tracking system, archiving various valuable initiatives and ventures made by different FBR organizations, officers, teams or specially created cells from time to time.

It also lacks any exhaustive, fool-proof and IT-enabled handing over a module (from predecessors to successors) for such initiatives, any institutionalized internal follow-up system, and any internal evaluation mechanism to gauge whether the goals envisaged under FBR’s flagship ventures have been logically pursued achieved.

Therefore, it was reasonably assumed that in most cases, the good job done is wasted, diluted or compromised with the transfer of individuals, and dissolution of the cells which are taken over by new managers.

FTO initiated the investigation in terms of Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), as FTO Secretariat had evidence-based information that some of the most meaningful and innovative initiatives of FBR’s officers and field formations stand diluted and washed away due to follow up failure, frequent posting and transfers of officers, and massive changes of jurisdictions

While conducting the aforesaid in-house analysis, FTO Secretariat obtained information that a list of potential cases of tax evasion (including the aforementioned six cases), along with a detailed Investigation report and case study was prepared and shared by DG BTB FBR. This information was duly shared in December 2018 with the concerned field formations for taking action against said entities for not declaring the true particulars of their receipts/income and not discharging their responsibilities as withholding agents.

However, in 2019, FBR’s management suddenly shelved this whole BTB regime overnight and disbanded BTB Zones in Islamabad, Lahore and Karachi. The Office of DG BTB was relegated to a ceremonial entity. Thus, in addition to losing an effective organization, the repository of the whole above information was suddenly rendered extinct.

Such an attitude on part of FBR reflects clear maladministration in terms of section 2(3) (ii) of FTO Ordinance, 2000. FTO’s in-house analysis was mainly based on investigation reports generated by DG BTB which clearly show that the above concerns were not declaring the true particulars of income and were not discharging their responsibilities as withholding agents, especially in respect of sections 149, 152 and 153.

To make out foolproof cases, the total receipts of the said companies were obtained by DG BTB from the data hosted by the International Aid Transparency Initiative, which was compared with the declared receipts in the tax returns. Huge discrepancies were observed, casting doubt about tax evasion by the said companies. A detailed analysis was provided to the department discussing the parameters and extent of tax evasion.

However, after disbanding the DG BTB office, the progress status of this case is not known. It appears that the valuable information shared with the field formations was lost due to the inattention, incompetence and ineptitude of the officers holding jurisdiction of this case. The department was, therefore, asked vide notices u/s 10(4) of the FTO Ordinance 2000 to file a response to the above-mentioned observation and submit para-wise comments.

Thus, instead of safeguarding the interest of revenue by plugging loopholes in the tax declarations of instant cases, the concerned Commissioner Inland Revenue (CIR) Large Taxpayers Office (LTO) Islamabad chose to contest its motion investigations on technical grounds.

It is pertinent to mention here that out of 34 such cases in which notices were issued by the FTO office, compliance has been made by the Corporate Tax Office (CTO) and Regional Tax Office (RTO) Islamabad in 27 cases. As per information provided by field offices, demand amounting to Rs. 660 million has been raised in six cases at CTO and RTO Islamabad.

Objection to the jurisdiction raised by the CIR LTO Islamabad in this case reflects an inherent contradiction in compliance patterns of FBR’s field formations. On one hand, in 27 similar cases wherein the information was provided, the intervention of the FTO’s office has enabled the field formations to recover millions of rupees in revenue.

However, on contrary, LTO Islamabad is adamant to protect inattention, ineptitude and inefficiency. Non-provision of information by CIR LTO Islamabad is therefore blatantly against the interest of the public exchequer and the core function of FBR, noted FTO.

FTO office has recommended the FBR to direct the Director General Internal Audit, Inland Revenue to inspect the subject six cases to ensure that action is initiated and concluded as per information provided by FTO during instant investigations; It has also directed the Chief Commissioner LTO Islamabad to identify the officers who are responsible for the unwarranted delay and resultant loss of revenue.