KARACHI: Pakistan’s tax authority has made a landmark detection of Rs70 billion on account of over-invoicing and trade-based money laundering by solar panels importers.
Federal Board of Revenue (FBR) carried out sector-based audit of solar penal importers to check twin aspects of over-invoicing and trade based money laundering (TBML).
State Bank of Pakistan also recently asked federal ministries to develop a list of reputed solar panel importers who can be permitted to import solar panels without the risk of money laundering and over-invoicing and the audit findings of FBR can be appropriately helpful in this respect.
According to FBR, scrutiny of import data confirmed that during last five years (2018-2023) minimum import values of Chinese origin solar panels ranged between $0.08 to $0.16 per watt. It was further determined that bonafide import values of Chinese origin solar panels should have ranged below $0.22 per watt.
Contrarily, WeBOC data revealed that many imports of the solar panel importers were declared at much higher import values i.e. $0.23 per watt or above. By setting the over-invoicing benchmark at Rs40 million during last five years, the cumulative over-invoicing was detected in 6,232 imports of 63 importers amounting to Rs69.5 billion; as declared import values of solar panels ranged between $0.23 to $2.26 per watt.
Scrutiny of import data and income tax declarations of 39 importers reflected high disparity between financial worth (equity and liabilities) and import volumes, such that 39 importers having financial worth of Rs. 14.7 billion, imported solar panels worth more than Rs 201 billion.
Similarly, scrutiny of bank-account records of 44 importers confirmed heavy cash deposits amounting to Rs47 billion (i.e almost 24% of the total bank deposits worth Rs193 billion).
In many instances, heavy amounts (10 million or above) were deposited in the bank accounts as cash transfers in a single transaction, while in case of many bank accounts, yearly quantum of cash transactions was more than Rs20 million, that places said importers and bank accounts under high-risk suspected category for money laundering considerations.
Scrutiny of financial flows revealed that import remittances were questionably transferred to third countries like UAE, Singapore, Switzerland etc. 22 importers (with imports remittances worth Rs. 50 million or more), transferred Rs. 16.5 billion to third countries (especially UAE and Singapore) whereas respective imports of solar panels had originated from China.
Commercial banks allowed transfers of import remittances to third countries without any NOC from the Chinese exporters in violation of Foreign Exchange Regulations and Framework for Managing Risk for Trade Based Money Laundering and Terrorist Financing.