Tax deductions ending up in drivers, employees’ accounts

ISLAMABAD: The Federal Board of Revenue (FBR) has found that some manufacturers, distributors and dealers of highly influential sectors such as sugar and textile were allegedly involved in sales tax evasion and concealment of income worth billions of rupees through Benami proceeds.

The FBR has found a racket of alleged tax evaders when the tax machinery was considering different options to bring income of distributors and dealers into tax net. The FBR has offered tax amnesty scheme to Benami assets and account holders and the tax machinery is making all-out efforts to get access to Benami accounts in collaboration with banking sector. The disclosure of such cases has strengthened the FBR position in front of policy makers that something needs to be done to plug rampant leakages through policy actions.

According to official document available with The News states on Tuesday that sales tax frauds and Benami transactions were occurring by misusing CNICs of drivers and daily wage workers with involvement of manufacturers, distributors and dealers in sugar and textile sectors.

Now the FBR has sent out official communication to field formations including Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Taxpayer Units (RTOs) across the country for launching investigation into sales tax frauds and Benami transactions. The Directorate General of Broadening of Tax Base being responsible for registration of new taxpayers, scrutinised withholding statements submitted by various manufacturers mainly in the sugar and textile industry.

It is revealed that the manufacturers deducted tax under section 236G &H of the Income Tax Ordinance 2001 and deposited the same in the name of freight drivers coming to pick up goods for onward delivery, daily wage employees etc. A number of these individuals have submitted their affidavits stating that these transactions are unknown to them and they never made any business transaction and their CNICs have been misused. The fake sales to prevent whole sellers and retailers are in billions of rupees with hundreds of companies but so far affidavits have been filed in around 20 cases by the persons whose CNICs have been misused.

This shows that it is an attempt to conceal transactions resulting in income of manufacturers, dealers and distributors in addition to evasion of Sales Tax of the entire supply chain, and is liable to prosecution under the Income Tax Ordinance 2001 and Sales Tax Act 1990. The FBR has warned of persons involved in tax evasion.