Hundreds of importers, officials involved in tax evasion scandal: whistleblower

In its latest crackdown against tax evasion, the Federal Board of Revenue (FBR) has decided to pursue legal action against individuals and entities for tampering with customs declarations. Reports reveal that 463 importers collaborated with officials from both Pakistan Revenue Automation Limited (PRAL) Pakistan Single Window (PSW) to carry out the tax evasion scheme.

Moreover, 106 clearing agents aided the tampering process which affected more than 2300 customs declarations. According to reports, the operation caused the national exchequer to remain unable to realize approximately 14 billion rupees in revenues.

Details regarding the case surfaced after a whistleblower documented the manipulation of customs declarations by importers to avoid tax payments. Reports claim that the whistleblower is a former PRAL employee and that his confession helped uncover the fraud that had been going on for close to five years.

The whistleblower is in hot waters with the law themselves as they face multiple corruption charges. However, some believe that their testimony was crucial to reveal the crime.

The FBR recently posted a colossal revenue shortfall of 386 billion in the first half of fiscal year 2024-25. Had these importers been filing their taxes lawfully, this shortfall could have been approximately 3.63 percent narrower.

As per reports, the tax evasion scheme initially began in January 2020 and quickly enveloped a vast array of officials given the amount of money that could be made by defrauding the FBR. Officials helped importers evade taxes by preying on weaknesses that they had identified in the Web-Based One Customs (WeBOC) and PSW systems.

Under Pakistan’s legal framework, transshipment goods declarations (TGDs) are to be converted to ‘Home Consumption’ GDs at dry ports. However, officials abused the system by altering TGDs by changing the values, quantities and even product classification codes of imported goods to avoid duties on customs.

Reports claim that the fraud was mainly perpetrated at dry ports with tampered TGDs being a pressing issue in Peshawar (1,671 tampering instances) and Lahore (522 tampering instances). However, the fraud is not limited to the aforementioned cities as the tax evasion scheme enveloped operations in Islamabad, Multan, Sialkot and Quetta.

While tampering with GDs is a publishable offense under Pakistan’s law, the gains from assisting tax evasion schemes are particularly alluring for public officials – which cause the FBR to face revenue losses. The FBR has directed the Directorate General of Post Clearance to audit declarations and calculate the monetary value of the damage the scheme had on the entity’s revenue stream.