A gang of cybercriminals, with the connivance of Federal Board of Revenue (FBR) and Pakistan Revenue Automation Limited (PRAL) officials, caused a huge loss to the national treasury by using the dormant accounts of retired armed forces personnel.
The gang made fake supplies worth Rs. 1.625 trillion, causing a sales tax loss of Rs. 292.549 billion and an additional tax loss of Rs. 235.340 billion.
Almas Jovindah, Advisor Legal & Media Wing, informed the media that the cybercrime, involving a huge loss of government revenue, was conducted by a gang of cybercriminals facilitated by employees (present and/or past) of PRAL and FBR who had direct or indirect access to the entire computerized system. This gang operated in networks, initially spotting and extracting the sales tax registered dormant persons from the FBR website, and used their passwords for bogus/fake transactions to benefit end consumers/manufacturers.
In this case, the cybercriminals, with the active support of insiders, used the sales tax account of Mrs. Firdous Anwar of Karachi, a 79-year-old living abroad with her children, who had been filing “Null” sales tax returns for more than four years without any business transactions.
They filed Annexure “C” declaring supplies of re-melting scrap ingots of iron or steel worth Rs. 1.625 trillion, with the impact of sales tax of Rs. 292.549 billion and further tax of Rs. 235.340 billion. It was subsequently transferred by the gang to the supply chain, with the major portion, i.e., Rs. 81.434 billion, supplied to a dormant account of retired armed forces personnel.
Later, the supply chain ended with seven ultimate beneficiaries, taxpayers from Lahore and Faisalabad, who were manufacturers of iron and steel. After conducting the tax fraud, these cybercriminals changed the password and email address so that the original taxpayer could not access their sales tax accounts.
The FTO Advisor Legal & Media Wing said these were paper transactions without the physical movement of any goods and without any banking transaction in terms of section 73 of the Act, resulting in a huge loss of government revenue. All the beneficiaries knowingly and deliberately purchased fake invoices, without any actual physical movement/transaction of goods and without payment.
The present loose and liberal enforcement regime has emboldened these unscrupulous registered persons to indulge, without the fear of being caught, in the lucrative business of using fake/flying invoices.
The edifice of sales tax law is erected on the principle of self-assessment, where complete trust is reposed in the taxpayers for submitting true and faithful declarations. To deter misuse of such trust, the law also has an in-built penal and prosecution mechanism, but the “Check” imposed in the web portal system in terms of Rule 18(5) of Sales Tax Rules 2006 to prevent tax fraud was disabled/deactivated for this purpose at that particular time.
The credibility of the FBR web portal, especially regarding sales tax, the security of the User ID/password, and the sanctity of taxpayers’ data were vandalized with impunity. For example, the complainant filed NULL returns without transactions, which were replaced with fake supplies in trillions of rupees.
Secondly, the “Checks” incorporated in the web portal in terms of Rule 18(5) of Sales Tax Rules 2006 were disabled/deactivated to facilitate the transactions.
Thirdly, the particulars of the complainant in the web portal, i.e., the mobile number and email address, were changed so that the complainant could not take any remedial action.
Sultan Ali, proprietor of M/s New Metro Footwear Co., expired on 09.02.2017, as per the death certificate issued by NADRA. As a result, he was deregistered, but the cybercriminals filed sales tax returns with fake supplies six years after the death of the taxpayer.
The FTO official added that the failure to provide security and protection of the complainant’s User ID/password and the sanctity of the taxpayers’ confidential data from misuse/hacking led to a tax fraud case on behalf of the complainant, causing administrative excesses tantamount to maladministration under section 2(3)(i)(a)(b)(c) of the FTO Ordinance, the FTO official added.
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Pakistan Army should set some SOPs for the dormant accounts of its retired employees, PA should direct all the retired officers either to remove the accounts or set some standards for those accounts that are not in use, otherwise everything is now open for Cyber criminals.
fbr trying to fix pakistan when their own house is out of order.
I can bet large scale tax evasion cannot be done with fbr officials. To date their employees go shop to shop to threat and get ransom.
Was it really FBR employees…. I don’t think so… These retired officers live a more luxurious life than most millionaires..