KARACHI, Dec 8: The issuance of fake export refund claims is causing losses to the national exchequer, a senior official at the Regional Tax Office (RTO) told Dawn on Saturday.

`A mafia operating in the regional tax offices of Karachi is issuing fake refund invoices to exporters dealing in textile, garment, tyres, toys, medicinal chemicals and plastic sectors, the official said requesting anonymity.

`I believe that this is a scam of gigantic proportion involving a well-organised mafia,` the tax offi-cial, who was recently transferred to Large Taxpayers Unit (LTU) Karachi, stated in a file note to his successor, a copy of which is available with Dawn.

The situation has come to a pass that a senior officer had to inform his successor in writing.

`Reference my handing over note dated November 14, 2012, I consider it absolutely necessary that I apprise you of all information and some of the facts related to a fake refund mafia which these days is actively operational in RTOs Karachi,` the official said in the relevant note.Explaining the modus operandi of the mafia in his note the tax official said that the `big game` begins with registration of fake and fraudulent manufacturing units. Usually the declared addresses for such units are given in the troubled areas of the city normally considered as no-go areas like Baldia Town, Sher Shah, etc.

He further explained that in most cases the addresses were incomplete and incomprehensible i.e. without specific streets or sector making it impossible for any courier service to serve any letter to thegiven address.

The tax official maintained in his note that such units either do not exist at all or in some cases comprise of rented premises with some junk or scrapped machinery, which in no way could have the manufacturing capacity.

Interestingly, such manufacturing units operate without essential public utilities like electricity or gas and owners of such units whose turnover (on papers) run in millions of rupees but are never seen by or known to anyone, he added.

Surprisingly, he said, in somecases owners turn out to be ordinary people of humble background, menial employees whose CNIC is misused and mostly are found oblivious to the fact that they are the owners of a textile mill or a garment factory in FBR records.

Such units operate erratically and as per records for months there is no activity and suddenly they report exorbitant sales or turnover in a month or two, the tax officialnoted.

The official stated that such intermittent spells of activity negate the principle of going con-cern concept and are alien to prevalent market practices. Being zero-rated there was no tax on sales to un-registered persons but when FBR imposed a minimum tax on sales to un-registered persons, such units started registering dummy distributor as well.

With this the chain of fraud completes, commencing from fake suppliers to fake manufacturer and then dummy distributor. Analysis of many such clusters revealed cyclical patterns in which many such units turn out to be already black-listed.