Pakistan suffers PKR 7 trillion in evaded revenue: Finance Minister

Finance Minister Muhammad Aurangzeb has disclosed that total revenue leakage and evasion in Pakistan amounts to around PKR seven trillion, with 50% attributed to sales tax evasion.

Speaking at a press conference on Thursday alongside Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, the minister highlighted the findings of a data analytics exercise that pinpointed specific sectors and instances of evasion.

The data analytics module, now institutionalized with an audit trail, aims to provide ongoing insights even after current officials leave office.

Major sales tax evasion was identified in five sectors including steel, cement, batteries, beverages, and textiles, totaling PKR 120 billion.

Specifically, the batteries sector saw PKR 11 billion in evasion, the cement sector PKR 18 billion, the beverages sector PKR 15 billion, and the textile sector PKR 23 billion.

Aurangzeb emphasized the severity of the issue, noting that many companies, including prominent names, misrepresent turnover and input claims to suppress tax demand.

He highlighted the problem of fake and flying invoices, where transactions are recorded on paper without actual underlying transactions, defrauding the exchequer.

FBR Chairman Langrial added that input adjustment fraud is the biggest issue, with a revenue loss of PKR 250 billion identified.

He announced that FIRs would be registered and arrests made within a week, targeting owners, partners, and management of companies involved in tax fraud. Langrial stressed that CFOs and CEOs cannot absolve themselves of responsibility, as they sign the company accounts on which returns are filed.

Langrial also mentioned that October 15 is the last date for sales tax returns, warning that any company found evading taxes would face prosecution without forgiveness. He noted that the Audit Oversight Board is being strengthened under SECP to address the role of chartered accountant firms in these issues.

The minister concluded by stating that the size of revenue evasion and leakage necessitates immediate intervention, as the country can no longer afford such losses.