Fraudulent sales tax refunds: FTO urges FBR to take on corrupt officials

ISLAMABAD: Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to initiate criminal proceedings against tax officials, who are involved in issuance of fraudulent sales tax refunds to the tune of billions.

A special report of the FTO on sales tax refunds (2024) revealed that a system of redress and appeal be made to keep it transparent and free of human involvement. If there are any frauds then criminal proceedings should take place - not only against the concerned applicant but also of the official who collaborates and facilitates.

The reform shall be implemented sooner; otherwise, exporting industry will further suffer by denying them bonafide refunds creating serious issues of liquidity crunch for exporters.

In order to achieve the overall intent of export-led growth, policy makers need to ensure that legislative provisions are made to implement transparency and equality within the whole regime, the study said.

Whilst a sales tax premised on the principle that refunds are paid timely, the reality of fraudulent refund claims, as well as, the submission of non-qualifying input tax credits using fake and flying invoices that resulted in a refund claim, is a constant reality and burden faced by all — the tax machinery and the taxpayer alike.

Presently, secrecy surrounds the whole system. FBR call centre is helpless in appropriate feedback of the refund claimants.

There seems to be distrust by the FBR, not only of the exporters but also of their own staff. Surely rules of good governance must apply. A transparent easily understood system must be introduced, FTO study added.

Copyright Business Recorder, 2024