Massive Tax Fraud Uncovered
On July 25, 2025, Pakistan’s Federal Board of Revenue (FBR) revealed before the Senate Standing Committee on Finance and Revenue that over ₹2.2 trillion was lost to fraudulent “fake” and “flying” invoices over the past two fiscal years. FBR Member Hamid Atiq Sarwar stated that ₹1.37 trillion was detected in FY 2023 and ₹873 billion in FY 2024. This sum represents nearly one-third of customs tax revenue. 0
What Are Fake & Flying Invoices?
These terms refer to fraudulent documentation used to evade taxes—either entirely fake bills or invoices issued without actual goods or services exchanged. This abuse of the invoicing system is central to large-scale tax evasion. 1
Enforcement Gaps & Regulatory Backlash
Sarwar highlighted weak enforcement mechanisms and misuse of authority by some tax officials. While legal powers since 1996 allow tax officers to authorize arrests on suspicion—such as evasion, record tampering, or flight risk—such broad powers have sparked concerns. The new Finance Bill 2025‑26 introduces safeguards to prevent taxpayer and business harassment. 2
Business Community & Legislative Pushback
Chambers of commerce raised alarms over the arrest provisions in the new finance bill. In response, State Minister Bilal Azhar Kiyani announced the formation of a Prime Minister‑led committee to address their grievances and clarified that a circular will soon explain the bill’s ambiguities. Senate chair Saleem Mandviwalla cautioned that amending the bill too soon—after IMF approval—could send the wrong signal. 3
Internal Accountability & Reforms
Sarwar asserted that the FBR has imposed disciplinary action against officials misusing their authority, claiming it has done more than other departments at federal and provincial levels. There’s now stronger internal oversight and enforcement. 4
Senate Committee Recommendations
The committee also recommended that the State Bank of Pakistan (SBP) provide detailed analytics on the contribution of freelancers to software exports over the past 15 years. It also proposed exempting journal and periodical subscriptions from taxable IT services. 5
Key Figures & Timeline
- Totals over 2 years: ₹2.25 trillion (₹1.37 T + ₹0.873 T)
- Percentage of customs tax lost: ~33% in FY 2023‑24
- Law in force since: 1996 Finance Act (authorizing arrest powers)
- Finance Bill: 2025‑26—includes safeguards against misuse
- Grievance committees: Formed by PM; circular forthcoming
- Accountability: FBR claims internal action on errant officers
Trivia & Quiz Insights
Trivia fans: Pakistan lost over ₹2.2 trillion in tax revenue to fake/flying invoices in two years, which is close to one‑third of customs revenue. What new bill added safeguards to FBR’s arrest powers? Answer: Finance Bill 2025‑26.
Source: Firstpost