Chain audit completion: FBR failed to implement FTO’s key recommendation

ISLAMABAD: The Federal Board of Revenue (FBR) has failed to implement a key recommendation of the Federal Tax Ombudsman (FTO), which was also duly upheld and confirmed by the President Zardari to constitute a team of sales tax/IT experts to implement an IT-based system to eliminate the menace of fake/flying sales tax invoices and complete the chain audit.

The case has been argued by Lahore based tax lawyer Waheed Shahzad Butt against the gang of fraudsters comprising FBR officers, lawyers, chartered accountant and some criminals. This systemic abuse, which has been causing multi-billion-rupee losses to the national exchequer annually, could only be curbed through the introduction of a robust technological mechanism and completion of a “chain audit” of transactions from inception to conclusion. However, despite clear and binding directions, FBR has yet to act meaningfully, Waheed added.

The continued failure to implement these critical reforms not only undermines the credibility of the FBR but also perpetuates a cycle of massive revenue leakages, eroding public trust in the country’s governance and accountability framework. FTO has provided opportunity to FBR to submit implementation report on or before 31.08.2025.

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The FTO order stated, “Complaint was filed against FBR, regarding issuance of fake/flying sales tax invoices by misusing complainant’s STRN and other particulars.

FTO has recommended the FBR to examine the issue of fake/flying invoices and misuse of STRNs by constituting a team of Sales Tax experts and IT experts and chalk out a viable strategy to be translated into a foolproof IT based system with comprehensive checks and balances, and capable of issuing of red alerts to the tax managers/ administrators with the objective to eliminate the menace of fake/flying invoices.

FBR to direct the CIR for taking and completing legal actions for recovery of loss of sales tax amounting to 156335 million involved in misuse of fake/flying invoices.

The FBR should also complete action regarding blacklisting of STRNs of all suppliers and buyers involved in fake/flying invoices in the instant case and complete the chain audit till the end.

The FBR should initiate appropriate action as provided under the law against the misusers of STRN and involved in tax fraud in the instant case, inclusive of any tax officials as per facts of the case, the FTO added.

Copyright Business Recorder, 2025