FBR Vulnerability Leads to Rs 81 Billion Tax Fraud in Pakistan

In a shocking revelation, a retired armed forces personnel, who owns a business named Gravity Traders, has come forward with serious allegations against the Pakistan Revenue Automation Limited (PRAL) and the Federal Bureau of Revenue (FBR). He claims that these institutions have unwittingly facilitated a massive tax fraud through his dormant tax account. This incident, which reportedly occurred between September 2023 and January 2024, has led to fraudulent transactions totaling a staggering Rs. 81.434 billion. This amount represents a significant shortfall of Rs. 14.658 billion in Goods and Services Tax (GST) that should have been collected for the Public Exchequer.

The complainant, Muhammad Shareef, has lodged a detailed complaint with the Federal Tax Ombudsman (FTO), specifically targeting the Commissioner Zone-III. He accuses this official of illegally blacklisting his Sales Tax Registration Number (STRN) without providing proper notification, which is a requirement under Section 21 of the Sales Tax Act, 1990. Shareef insists that during the time in question, his account was completely dormant, with “NULL” sales tax returns filed, indicating that there were no sales or purchases made.

This case sheds light on the systemic vulnerabilities within the FBR, where dormant accounts can be exploited for fraudulent activities. Shareef emphasizes the administrative failures that allowed his dormant account to be misused without his consent. Unfortunately, this is not an isolated incident. There was a previous case involving a fraud of Rs. 11.6 billion, which was also facilitated through internal breaches within the FBR. Despite the FBR’s assurances that their officers were not involved, the recurrence of such fraud raises serious concerns about the need for stringent internal controls and accountability.

In response to these alarming allegations, the FTO has directed the Chief Commissioner-IR, LTO Lahore, to initiate legal proceedings to address this tax fraud. This move aims to ensure that those responsible are held accountable under the law. Additionally, the Member IT of the FBR has been tasked with investigating the breach and implementing necessary corrections to safeguard data integrity.

This ongoing investigation into the alleged fraud highlights the urgent need for robust security protocols and vigilant regulatory oversight. It is crucial to prevent the exploitation of financial systems and protect taxpayer rights. As citizens, we must remain vigilant and demand transparency and accountability from our tax authorities. Only through rigorous oversight can we hope to restore trust in our financial systems and ensure that such fraudulent activities do not occur in the future.