Menace of sales tax fraud: FBR fails to implement suggestions of FTO

ISLAMABAD: The Federal Board of Revenue (FBR) has failed to implement the most critical and far-reaching recommendations of the Federal Tax Ombudsman (FTO) to curb the menace of sales tax fraud through fake and flying invoices with active connivance of some advocates, chartered accountants and tax officers.

When contacted Advocate Waheed Shahzad Butt, who has argued the case to curb sales tax fraud with state, told Business Recorder that the FTO, acting with rare clarity and wisdom, categorically recommended immediate and time-bound legal action for recovery of colossal loss to the national exchequer amounting to Rs. 15,335 million (Sales Tax) arising from the systematic misuse of fake and flying invoices.

However, these binding recommendations have been kept in cold storage by the FBR, raising grave questions about its intent, integrity, and commitment to safeguarding public revenue.

Sales tax liabilities against income tax refunds: No prior notice required for adjustment or recovery: FTO

The FTO had directed the FBR to complete the process of blacklisting of sales tax registration numbers (STRNs) of all suppliers and buyers involved in fake and flying invoices, and to carry out a complete chain audit till the very end, so that no beneficiary of tax fraud escapes accountability. Initiate appropriate legal and disciplinary action against all misusers of STRNs involved in tax fraud, including any tax officials found complicit, thereby striking at the unholy nexus between fraudsters and corrupt elements within the tax administration.

Constitute a specialized team of Sales Tax experts and IT professionals to thoroughly examine the phenomenon of fake/flying invoices and misuse of STRNs, and to devise a viable, foolproof, IT-based system equipped with comprehensive checks and balances. Develop and operationalize an intelligent red-alert mechanism capable of issuing automatic warnings to tax managers and administrators, with the clear objective of eliminating the menace of fake and flying invoices once and for all: FTO ordered.

The continued failure to act on the FTO’s recommendations is no longer a matter of inefficiency; it constitutes institutional defiance, undermines the rule of law, and erodes public confidence in the tax system. At a time when the country is struggling with fiscal stress, such conduct amounts to nothing short of economic sabotage, Waheed Butt added.

Copyright Business Recorder, 2025