ISLAMABAD: The Direc­torate General of Intelligence and Investigation (DG I&I) of the Federal Board of Revenue (FBR) has unearthed several cases involving business concerns that park money in far-flung areas after making cash transactions in order to avoid taxes.

Preliminary investigations have revealed tax evasion of billions in just three cases that fall under the category of money laundering.

“The government has decided to investigate the origins of these accounts and will try to conclude the probe by taxing the amounts [involved] under relevant tax laws,” a senior official told Dawn on Friday.

He said the cases would be dealt with under the Anti-Money Laundering Act, 2010 and Benami (Prohibitions) Act, 2017. Strange patterns of tax evasion are emerging but the government is committed to documenting the economy so that everybody is liable to pay tax, according to the official.

Official documents seen by this reporter show that the Hyderabad chapter of DG I&I has filed three complaints with the Court of Special Judge Customs, Taxation and Anti-Smuggling, Karachi, under the Anti-Money Laundering Act, 2010.

Raids carried out on properties of several business concerns

The complaints have been filed against three persons — Hikmat­ullah, Abdul Nafay and Hayat­ullah — after thorough investigations. According to sources, the amounts received in the accounts of these individuals are far grea­ter than what their tax declarations suggest. It was found that between 2014 and 2018 Hikmat­ullah, who is reportedly a scrap dealer, had multiple bank accounts.

He declared receipts of Rs1.57 million and paid no income tax. However, the bank credits amounted to Rs10.5bn.

According to FBR, Hikmatullah concealed his true revenue/turnover/income from the government with the intention of evading due taxes on his income. His is a sole-proprietorship business, but he indulged in high-level financial activity in his bank accounts.

The tax evasion estimated in this case comes to about Rs5.64bn.

In the second case, Abdul Nafay, who also is running a sole-proprietorship business, declared receipts of Rs3.39m and paid no income tax during the period from 2014 to 2018. However, the bank credits are amounting to Rs6.61bn.

The document shows Nafay is a wholesaler of rice and dry fruits and is maintaining several accounts in different banks for business transactions. It is estimated that the tax amount evaded comes to about Rs3.6bn.

Another wholesaler of rice and dry fruits, Hayatullah, is maintaining several accounts in different banks for business transactions. From 2014 to 2018 he declared receipts of Rs1.45m and paid only Rs51,000 as income tax. However, the bank credits are amounting to Rs1.96bn.

The FBR estimates a tax evasion of over Rs1bn in the case of Hayatullah.

According to the documents, the regional directorates of I&I in Faisalabad, Multan, Peshawar and Islamabad have also conducted raids on properties of fraudsters in different sectors.

The Faisalabad directorate conducted raids on properties of two unregistered persons from the engineering sector, who were engaged in taxable supplies without paying any sales tax in Sargodha. The names of their units are M/s Muhammad Ashraf Engineering Works and M/s Ali Raza Haider & Brothers Engineering Works, Sargodha.

A scrutiny of impounded records is under way to ascertain the size of tax fraud in this case.

The Multan directorate of I&I carried out a raid on the premises of Malik Plastic Factory, which is engaged in manufacturing and supplying shopping bags and other plastic products without being registered for sales tax. The said business is paying electricity bills of about Rs11.728m per annum and making supplies of approximately Rs60m but paying no sales tax.

Similarly, the Peshawar directorate impounded a huge number of illegal filter rods in Mardan during the ongoing campaign against counterfeit cigarettes. Evaded amount of Federal Excise Duty is expected to run into millions in this case.

The Islamabad directorate of I&I conducted a raid on a leading uniform brand — M/s Saqib Brothers — which too was engaged in making taxable supplies without getting registered for sales tax.

According to the tax official, proceedings are under way in all these cases. Director General of I&I Dr Bashirullah Khan has advised his teams to complete the investigations as soon as possible.

Published in Dawn, January 25th, 2020