KARACHI: The Federal Board of Revenue (FBR) has initiated an investigation against senior officers of Inland Revenue Services (IRS) against the issuance of exemption certificates to fake companies that incurred huge revenue losses for the national exchequer, official sources said on Wednesday.
Pakistan Customs has discovered a large number of exemption certificates that were issued to people engaged in foreign trade and declared themselves manufacturers but do not have the facility of manufacturing units at their mentioned place of business, sources said.
Under the prevailing laws, the IRS commissioner has the authority to issue an exemption certificate to an applicant after thorough investigation and verification of details provided, and in case importer having manufacturing units should have physical inspection, sources said.
Recently, Pakistan Customs has detected traders who were indulged in misusing the facility of tax exemption. The Customs officials also sent a list of around 3,500 importers and clearing agents to the FBR for taking action.
Customs sources said that the scam involved billions of rupees that were not possible without the fake exemption certificates that were issued by the IRS officers.
Taking serious notice of the discovery of the Customs Department, the revenue body headquarters issued directives to the chief of the Large Taxpayers Units and Regional Tax Offices (RTOs) to revisit all the exemption certificates issued previously and to take stern action against the involved persons.
The FBR issued several statutory regulatory orders (SROs), allowing exemptions and concessions to various segments of businesses with the condition of obtaining exemption certificates from the Inland Revenue Department.
The sources said that the Customs officials were pushing the FBR for taking action because during the first seven months of 2012-13 the cost of exemptions against concessionary SROs had been recorded at Rs36.43 billion.
In Pakistan, the SRO culture has created distortion in various sectors of the economy and also resulted in tax evasion / avoidance in the system.
In December 2012, the Public Accounts Committee of the National Assembly had been informed that exemptions and concessions worth Rs650 billion was allowed to various individuals and sectors through SROs.
Pakistan and the International Monetary Fund (IMF) recently agreed on a $5.3 billion loan programme that is likely to be approved by September. To finalise the loan programme, the IMF has advised the Pakistani authorities to phase out all existing SROs.
The FBR officials in IRS said that the LTUs and RTOs have initiated the investigation against those persons issued exemption certificates to taxpayers, who misused the facility.
The sources said that in case officials found to be involved in the scam then they will face harsh penalty of removal from services.