Steps being taken to plug tax evasion


Dec 23 - 29, 2002

The revenue collection which provides fuel to run the vehicle of the socio-economic and political systems largely depends on the implementation of the policies and honest compliance by the taxpayers. This is the candle, which can burn from both ends if the two sides are not faithful to the purpose.

In our case, getting jobs in tax collection agencies is considered highly lucrative much sought after even by the professionals like doctors and engineers. Presence of a number of these professionals in revenue collection departments is obviously indicative of the trend and self-explanatory.

The overall performance of the taxation system depends on its revenue generation, which is generally gauged by the tax to GDP ratio.

Compared to buoyant growth in CBR tax collection during 2001, receipts increased by only 3.0 per cent during financial year 2002. The marginal net growth was weaker than real GDP growth and the inflation rate, mainly due to an unexpected decline in import based tax and exceptionally high tax refunds.

Besides the decline in import there were other causes into decline of sales tax collection especially by the importers through unfair means. Although cases of tax evasion can not be materialized without connivance and support of the tax officials and there is a need for effective checks and balances especially in those departments where officials have to come into public dealings.

In order to improve collection of sales tax, which contribute in the overall tax collection, the CBR authorities have issued directives to generate sales tax at the import stage by taking stern action against the unscrupulous importers.

The sales tax projection for 2002-2003 at the import stage is Rs108.75 billion showing an increase of Rs16.15 billion of 17.5 pr cent as compared to collection of Rs92.6 billion during previous financial year.

The pace of increase in revenue collection is much less than the desired level of growth, which prompted the authorities to plug in loopholes at the import stage.

Under a new action plan to achieve sales tax target of Rs108.75 billion at the import stage. The federal tax authorities have ordered investigation against importers allegedly involved in clearance of consignments using fake sales tax registration certificates and sales tax returns.

In some cases import registration was obtained on dubious NICs and bank accounts were opened on the same fake identity cards. These tax evaders obtain L/C pro forma from the same bank but never opened L/C for import of raw material etc.

The Central Board of Revenue has started countrywide operation against the gang of importers and clearing agents importing goods using name of other sale tax registered importers.

The authorities have unearthed cases where bill of entries were removed from the record of Pakistan Revenue Automation Limited (PRAL) in connivance with the employees and fake sales tax registration certificates were issued by the sales tax officials.

It is impossible to check any sales tax fraud without the help of customs department, which is responsible for clearance of consignments.

In view of the huge sales tax evasion by the importers, the CBR has forthwith established a customs Liaison Cell in each collectorate of Sales Tax and appointed customs officials as in charge of these cells. They have been assigned the job to receive data and coordinate with the sales tax and customs department to hunt such importers. A number of such importers had allegedly submitted fake registration certificates and sales tax returns for clearance of imported goods. This is a clear violation of Sales Tax General Order, which binds each importer to produce copy of sales tax registration and sales tax returns for the preceding month in order to file bill of entry.

The data pertaining to the registration/returns of the importers for each month is already available with the PRAL.

To eliminate the chances of fraud, the collectors of customs would ensure clearance of imported goods only after verification by PRAL. In case information about the registration or filing of returns is not available with PRAL, the same would be obtained from the respective collectorate of Sales Tax. A large number of importers in connivance with clearing agents, import goods using name of other sales tax registered importers either by purchasing import authorities or by committing fraud without taking the registered sales tax importers into confidence.

Such importers do not declare any value addition and occasionally file sales tax returns without clearly indicating net payable amount of sales tax. The habitual violators change their declared addresses and are not traceable for audit purposes. However, official maintained such type of fraud is not possible with the active support of the clearing agents. Hence, all clearing agents have been warned to strictly follow rules of the Customs. It is learnt that Collectorate of Sales Tax Karachi (East) has made a break through in detecting tax evasion by importers. Investigation and prosecution branches of all collectorates of customs have been given assignment to detect similar cases by using techniques adopted by Collectorate of Sales Tax Karachi.