FBR Vows Legal Action Against Tax Fraud in Key Industries
The government has issued a stern warning to non-filers and Chief Financial Officers (CFOs) of wealthy manufacturing companies, urging them to comply with tax obligations and cease exploiting input adjustments—a significant avenue for tax fraud that undermines public finances.
Finance Minister Mohammad Aurangzeb stressed that non-filers should be on alert, as the government is committed to tracking down the biggest tax offenders.
Speaking at a press conference held at the Federal Board of Revenue (FBR) headquarters, accompanied by FBR Chairman Rashid Mehmood Langrial and Inland Revenue Policy Member Hamid Ateeq Sarwar, Minister Aurangzeb revealed that sales tax evasion currently amounts to around Rs3,400 billion.
Chairman Rashid Mehmood cautioned CFOs against approving fraudulent sales tax returns, warning that they could face criminal prosecution if found responsible. He emphasized that legal action would be taken against those who certify false returns and that CFOs must now provide affidavits confirming the accuracy of monthly sales tax submissions.
Mehmood also acknowledged the FBR’s past challenges and expressed a renewed commitment to improving the tax-to-GDP ratio, with the aim of raising it to over 13%. He underlined the importance of tackling tax fraud in major industries, as the current tax-to-GDP ratio of 9% to 10% is unsustainable without international financial support.
The Finance Minister pointed out that five key sectors—textiles, cement, beverages, iron, and steel—are responsible for an estimated Rs227 billion in annual tax evasion. The FBR has already identified this amount and will soon begin recovery efforts.
Out of the 300,000 registered manufacturers, only 14% are implicated in the Rs3,400 billion sales tax fraud. Many of these companies underreport their turnover, overclaim input taxes, or engage in fraudulent invoicing. The Finance Minister highlighted findings from sector-specific studies, particularly focusing on the iron and steel, cement, beverages, and batteries industries.
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