Senate finance panel told...: ‘Banks accepted Rs42.8bn cash deposit by one non-filer without due diligence’

Mehtab Haider
Thursday, Nov 30, 2023

ISLAMABAD: The Federal Board of Revenue (FBR) Chairman Amjad Zubair Tiwana told a Senate panel on Wednesday they had short-listed one million potential filers, who would be pursued to bring them into the tax net.

He said there were 11.4 million registered business entities, out of which 5.3 million were return filers till the last financial year. Now the tax machinery had identified 2.5 million potential non-filers, whereby the FBR deducted Rs15,000 tax through different transactions, but they never bothered to come into the tax system. “We have a target of 7 million return filers for the current fiscal year but only 3.3 million had filed returns so far,” he said.

The chairman said the FBR had secured information from NADRA [National Database and Registration Authority] in case of 550,000 potential non-filers, who would be dispatched notices. So far, the FBR has sent out notices to around 450,000 for compliance and utility connections would be disconnected in case of failure of compliance of this notice.

The Senate panel was informed by the FBR that an investigation had found an alleged nexus of five banks whereby one non-filer deposited whopping cash amount of Rs42.772 billion, though the State Bank of Pakistan (SBP) utterly failed to satisfy parliamentarians about trade-based money-laundering of Rs81.6 billion through over-invoicing of imported solar panels.

Despite depositing such huge cash, the banks have miserably failed to comply with Know Your Customer (KYC) and other due diligence-related requirements.

The FBR high-ups made startling disclosures before the Senate Standing Committee on Finance and Revenues under the Chairmanship of Senator Saleem Mandviwalla that two banks received the largest chunk of cash deposits worth Rs18.991 billion and Rs22.84 billion, respectively.

The FBR also conceded that its investigation into the trade gap with China in the shape of under-invoicing stood in the range of $2 to $3 billion instead of $8 billion on an annual basis, calculated by the International Trade Centre’s Market Analysis and Research Guide. The FBR high-ups blamed the transit trade with Afghanistan as a major source of discrepancy in the trade-related data as it included $3.5 billion coming from China for Afghanistan through Pakistan as a trade gap.

Secondly, the import compression has resulted in blocking of 5,120 containers during the year 2022 having value of $0.44 billion. The exchange rate fluctuation also contributed to it, almost filling the gap of $5 billion. “We accept that under invoicing exists in the range between $2 to $3 billion,” the FBR chairman testified before the panel.

On the issue of imported solar panels, the FBR high-ups informed the committee that they scrutinized thousands of GDs (goods of declarations), out of which 6,232 GDs of 63 importers were identified, out of total 480 importers. They had found massive discrepancies totalling over-invoicing of Rs69.5 billion.

After conducting detailed investigations, eight FIRs were lodged covering Rs40.94 billion, 60 per cent of Rs69.5 billion over-invoicing through scrutiny of 3,161 GDs was found. Then the FBR found involvement of three Quetta-based dummy companies and arrested owner Abdul Aziz, who confessed that they sent out money to Dubai, though the solar panels were imported from China.

The FBR high-ups said that Pakistan possesses exchange of information with Dubai, and now was seeking information to proceed further. The FBR also lodged FIRs against two Peshawar-based companies on charges of anti-money laundering. The Financial Monitoring Unit (FMU) was engaged to track down a Dubai-based company, Ocular General Trading LLC.

Senator Musadik Malik expressed his apprehension that the volume of alleged scandal might hover around $2 to $2.5 billion if the probe was expanded for all the 480 companies involved in import of solar panels. He said the FBR had thus far probed the case of $500 million. After raising tough questions, Senator Musadik Malik praised the FBR for conducting post-clearance audit and identified massive over-invoicing of Rs82 billion.

The SBP executive director said the Bank took a number of actions, including slapping of penalties, though he failed to specify any actions. The committee asked him to come up with a detailed report in the next meeting.

The Senate Standing Committee also took notice of two issues, out of which one was related to non-payment of salaries to daily-wage 1,300 teachers belonging to the Islamabad Capital Territory.

Ministry of Finance Additional Secretary Amjad Mehmood testified before the committee that the ministry had issued a notification for clearance of minimum wages to 1,300 teachers in July 2023, but actually the notification of minimum wage of Rs32,000 was issued on Nov 2, 2023.

The finance ministry blamed the AGPR for delay in payment of salaries and made one officer representing the AGPR a scapegoat.