Fake invoices business thriving


FAISALABAD: Employers at the Faisalabad yarn market use bank accounts of their illiterate employees for transactions through fake invoices that leads to arrest of the poor employees.

Naveed Iqbal, 28, an illiterate man was employed at the yarn market against PKR 8,000 monthly stipend and his employer had asked him to open a bank account to receive his salary. The Directorate of Intelligence and Investigation, Inland Revenue – Federal Board of Revenue (FBR) arrested Iqbal as his account was being used for transaction of fake invoices, said a Federal Board of Revenue’s intelligence official, seeking anonymity for the reason that he is not authorized to speak to media.

Faisalabad is considered a textile hub of Pakistan earning billion of rupees. However, the government is facing difficultly in grabbing people involved in the business of fake invoices and getting refunds.

Yarn and fabrics worth million of rupees are being sold to non-registered firms to avoid tax on the sales. Moreover, the millers and exporters claim refunds from the government by showing the fake sale to the registered firms.

Traditional mode of business at the yarn market is considered a main cause of the illegal business of fake invoices and mostly illiterate people or employees are being used for bank transactions keeping them unaware of the entire scenario.

Government is striving for expanding the tax net in the country. However, the FBR is unable to completely control the businesses of fake invoices also known as flying invoices causing loss of billion of rupees to the national exchequer.

Some elements working in the yarn market, traders of chemical and packages factories are involved in the illegal business of flying invoices. Some hidden hands of the FBR are also supporting the businessmen by facilitating them with the particulars of the unit that have been closed without any audit.

Shahid Ali, a trader of yarn market, told News Lens Pakistan, “Government has imposed 3 percent sales tax on non-registered and 2 percent on the registered firms. The traders sell their products to non-registered firms but show their transactions to the registered persons through the invoices.”

He added that registered taxpayers had surplus invoices as they used to hesitate while issuing invoices to buyers of their products. Subsequently, he said the surplus invoices would be sold to various people intended to get undue refunds from the FBR.

Ali further said, “The business of fake invoices was being done with the help of accountants, brokers, commission agents and business illiterate persons (person having no knowledge of sales tax and banks procedure). In this way, he claimed the exporters were receiving million of rupees refunds and causing loss to the national treasury.”

All accounts used for transaction of fake invoices are most of times in name of employees who don’t even know how to operate them. In case of any action, Ali said, the illiterate employee would be made scapegoat.

The FBR’s intelligence official said, “Naveed Iqbal told the interrogators that he had opened an account at a bank following the instructions of his employer.” He had signed his cheque book and handed it over to his employer. Once the employer used entire cheques of the book, he would give him PKR 5000 to 7000- for a new book.

A spinning mills owner, requesting for anonymity as he is afraid of the FBR’s officials, told News Lens Pakistan that fraud through fake invoices was being done owing to lethargy of the government. He said one could check that not a single case of fake invoices came up when zero-rated, having no tax on supplies scheme was intact in Pakistan.

“All frauds by blacklisted/suspended units are done by getting bogus units registered or by getting User ID and passwords of already registered but non-operative units, which is not possible without the involvement and co-operation of FBR officials,” he added.

Imran Shehzad, a yarn broker, said majority of the brokers were not registered with any government department and even FBR. He said the brokers were facilitating the firms and sold their invoices to the people claiming undue refunds from the government. He also criticized banks for closing their eyes towards huge transactions even in the absence of the actual account holders.

Another official of the FBR intelligence wing told News Lens Pakistan that the government had been facilitating the entrepreneurs, however, the facilitation was being misused. He said the government had issued strict instructions to move against the unscrupulous elements causing loss of million of rupees to the national treasury through the business of flying invoices.

He further said the people involved in this business apply refund claims through the fake buying and selling of different products. Majority of the dummy firms involved in the business of fake invoices are registered in Karachi, Lahore and Faisalabad tax regions. He added, “Recently a number of bogus firms involved in the fraud had been detected and some of the accused who cheated the FBR had also been arrested.”


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