Rs1,120 billion tax fraud probe expands to 500+ companies in FATA, PATA tax-free zones

The Federal Investigation Agency (FIA) has widened its investigation into an alleged Rs1,120 billion tax evasion scam involving

ISLAMABAD:  The Federal Investigation Agency (FIA) has widened its investigation into an alleged Rs1,120 billion tax evasion scam involving the misuse of tax exemptions available in Malakand, former FATA, PATA and other parts of Khyber Pakhtunkhwa.

According to documents available with Minute Mirror, the investigation initially identified 108 companies allegedly involved in tax evasion ranging from hundreds of billions of rupees through the misuse of FATA and PATA exemptions. The broader investigation concerns tax-free imports valued at more than Rs1,120 billion.
How the alleged scheme worked

Investigators are examining the alleged misuse of consumption certificates issued by the Federal Board of Revenue (FBR) to industrial units operating in tax-exempt areas.

According to investigators, raw materials worth approximately Rs1,120 billion were imported between 2018 and 2026 under tax exemptions granted to eligible industrial units. The probe is examining whether these materials were actually consumed at the factories for which the exemptions were granted.

Investigators suspect that some of the imported material was instead diverted from the designated industrial areas and sold in taxable markets in Punjab and Sindh. If established, such diversion could have resulted in the avoidance of customs duties, sales tax and other applicable taxes.

A senior FIA official involved in the investigation said the agency had faced difficulties obtaining and verifying consumption-certificate data from the FBR’s Inland Revenue system.

The official alleged that the absence of automated verification and reliance on manual clearance created opportunities for misuse. Investigators are now comparing import declarations with factory records and actual consumption data.

JIT investigates companies

Following recommendations by the Senate Standing Committee on Interior, the FIA has constituted a five-member Joint Investigation Team (JIT) to investigate the matter.

The JIT is headed by the FIA’s Additional Director General (North). Its members include Deputy Director Muhammad Afzal Khan Niazi, Deputy Director Faizan-ul-Haq and Inspector Faheem Mustafa Raja.

So far, statements from owners and management representatives of more than 60 companies have reportedly been recorded.

The investigation team has also collected documentary evidence, including banking records, Securities and Exchange Commission of Pakistan (SECP) registration information, factory logs and date-wise records of raw material consumption.

Meanwhile, 48 companies that allegedly failed to respond to earlier notices are being issued fresh statutory notices. Officials said continued non-compliance could result in criminal proceedings and action against assets, subject to the applicable law.

Probe expands to 500+ companies

The investigation, which initially focused on 108 companies, has now reportedly been expanded to more than 500 entities suspected of using similar methods to benefit from tax exemptions.

Sources said the FIA is examining the possible involvement of importers, clearing agents and officials who may have facilitated the clearance of consignments without adequate verification.

The JIT is also examining the role of officials posted at RTO Peshawar and FATA/PATA-related offices during the period under investigation.

Senate raises questions over exemptions

The probe gained momentum following proceedings of the Senate, where questions were raised regarding the implementation and monitoring of tax exemptions in the affected regions.

A senior official associated with the proceedings said the government had directed authorities to take strict legal action against those found responsible for organised tax evasion.

Officials said further notices, questioning and possible arrests could follow as investigators examine the records of companies and FBR officials who served between 2018 and 2026.

The FIA is continuing to assess the financial impact of the alleged misuse of tax exemptions and determine responsibility for any revenue losses established during the investigation.