Karachi, October 14, 2024 – The Large Taxpayers Office (LTO) Karachi convened a high-profile conference on Monday with corporate sector leaders, issuing a stern warning that the Federal Board of Revenue (FBR) has officially declared war on fraudulent sales tax practices.
The conference, attended by all LTO Karachi commissioners, conveyed a clear message from the government and the Ministry of Finance regarding zero tolerance for the use of fake and flying invoices in sales tax filings. The LTO is now fully committed to eradicating these fraudulent practices, which have plagued Pakistan’s revenue system and led to substantial losses for the national exchequer.
During a comprehensive presentation, Dr. Najeeb Ullah, Commissioner of Inland Revenue, Zone 1, LTO Karachi, revealed disturbing findings from ongoing inquiries and data analytics. “Investigations have exposed gross anomalies and malpractices in sales tax declarations,” Dr. Najeeb Ullah noted, adding that the majority of fake and excessive input tax claims trace back to major beneficiaries operating within the jurisdictions of LTOs, MTOs, and CTOs.
“There has been a continuous stream of contravention reports and communication slips, which LTO initially tried to address in a civil and amicable manner,” he stated. However, the increasing volume and undeniable evidence of malpractices, even among very large companies, has led the FBR to declare, ‘ENOUGH,’ and overhaul its strategy.
LTO Karachi, as the flagship organization of the FBR, plays a pivotal role in tax collection and compliance for the country’s largest taxpayers. The office has traditionally aimed to facilitate voluntary compliance, fostering trust between the corporate sector and tax authorities. However, the growing tide of sales tax fraud has pushed the FBR to adopt a more aggressive stance.
Dr. Najeeb Ullah further highlighted that the extensive scale of this revenue leakage would not have been possible without the complicity of highly skilled professionals in legal, accountancy, and IT sectors. He also pointed to systemic weaknesses within the FBR itself, including procedural lapses and internal collusion. “It’s a desperate situation,” he admitted, emphasizing that desperate times call for extraordinary measures. The FBR has now declared all-out war on fraudulent sales tax practices to protect the integrity of the country’s revenue system.
He warned that any discrepancies or deviations from industry benchmarks would be scrutinized, with ample opportunity given to explain the anomalies. However, in cases where evidence of fake or flying invoices, failure to adhere to the withholding sales tax regime, or avoidance of liability under Section 8B of Sales Tax Act, 1990 is found, legal and criminal proceedings will be swiftly initiated.
The LTO’s firm stance marks a critical turning point in the government’s efforts to curb tax fraud and ensure that Pakistan’s largest businesses comply fully with tax regulations.