White-collar crimes


It is a heart-wrenching fact that while we are all victims of the social ills prevalent in society today, including tax evasion, tax fraud, money laundering, bribery and corruption, we are at the same time all responsible – directly or indirectly – for these same crimes. The indifferent attitude of the masses towards these crimes encourages white-collar criminals to easily cheat governments and the public at large without paying even the social costs of their crimes. It is hard to face the stark reality that in many cases, innocent people unknowingly facilitate criminals in committing crimes that in some way contribute to income inequality and social injustice. 

In Pakistan, total tax revenue as a percentage of gross domestic product (tax-to-GDP ratio) has been hovering around the 10 percent mark for the last few years. This indicates that rampant tax evasion in our country is continuously hampering our growth and prosperity. Tax evasion bars the government from allocating reasonable resources for the development of the country. Moreover, tax evasion creates a resource crunch for the economic policy makers and resultantly, the government relies on internal or external loans to meet its developmental and non-developmental expenditure commitments to keep the economy running. These loans heavily impact the lives of middle and lower classes, who have no direct role in tax evasion; though they themselves are often unwitting perpetrators of tax crimes

One way that people exacerbate the problem without realising is by not asking for an invoice after paying for goods or services. Or, if the seller does provide an invoice without being asked, the buyer doesn’t analyze it in any great detail. This attitude not only encourages non-documentation of the economy but also increases opportunities for tax fraud. For example, we often visit restaurants and pay 16 percent sales tax on the total spent. However, if we don’t receive a proper sales tax invoice it gives the restaurant owner the chance to pocket the money paid as tax instead of depositing it into the national exchequer.

We have a right to refuse to pay sales tax if the seller or service provider charges sales tax but doesn’t issue a dated invoice which clearly contains a serial number, the name and address of the business, and its sales tax registration number. The sad truth of the matter is that we usually don’t receive or check invoices so end up paying our hard-earned money to tax fraudsters in the false belief that they are fulfilling their tax obligations. In developed countries, it has become the norm for customers to ask for an invoice and in many countries non-issuance or non-receipt of invoices is considered a criminal offence. In Italy, tax officials patrol the streets and randomly check customers as they leave department stores, hotels, restaurants, etc, imposing fines on anyone who can’t provide an invoice for his or her purchase.

According to tax laws, an employer is required to withhold income tax before disbursing salaries to his employees. The employer, being the withholding agent, has a duty to deposit the tax withheld by him into the national exchequer on a monthly basis. However, it has been observed that many owners of small or medium businesses religiously deduct income tax from the salaries of their employees but don’t pay it to the government. At the end of the financial year employees don’t ask their employers for receipts for tax payment and tax deduction. This allows fraudsters-cum-businessmen to cheat their employees and the government at the same time, to the loss of both. In this way employees simultaneously become both victims and perpetrators of a tax crime.

Our computerised national identity card is a sacred document. However, we distribute copies of our CNICs without giving a second thought as to how the recipient may misuse our identities. It’s not uncommon for a person to apply for a job and attach a copy of his identity card to his job application. His identity card may then be used by a tax fraudster to open a dummy business, which later gets registered for Sales Tax purposes. The business can now issue fake invoices that are used in obtaining fake refunds from the Federal Board of Revenue (FBR) or reducing the tax liabilities of its claimants. Nationwide, these fake invoices are causing annual losses of billions of rupees to the national exchequer. Moreover, people’s CNICs are used without their knowledge to obtain foreign currency from currency exchangers, open bank accounts, obtain arms licenses, etc.

Therefore, we should be vigilant in crossing copies of our identity cards before giving them to anyone so they cannot be used to operate benami accounts, dummy business concerns and other illegal activities.

In order to launder their ill-gotten money, corrupt individuals often approach winners of prize bonds and offer to purchase the bonds for 10 to 15 percent above the prize value. The winner, without knowing the reasons for paying the extra amount, agrees to sell his bond to that individual who successfully launders his dirty at a negligible cost. Another common money-laundering scheme is for earners of black money to offer better than market price for moveable and immovable assets with only one condition: a major chunk of the payment will be made in cash. The seller, thinking only of his personal profit, agrees to sell his asset, receiving payment in black money and thus becoming involved in money laundering. The general public also become victims of speculation, which is an integral part of commodity markets, stock exchanges, currency exchanges and the real estate sector. People invest in speculative assets when they observe others investing without fear. Thus, we encourage our peers to invest in commodities that have a bleak future.

We remain silent when we see a person’s assets growing disproportionately to his known sources of his income. We are not troubled when someone in a government department asks for money to speed a process along. We don’t intervene when we see a fraudster is cheating innocent people. In the end, we as a part of society, pay the heavy cost of all white-collar crimes in the shape of income inequality, inflation, insecurity, and poverty. We should keep vigilant so as not to become culprits of white-collar crimes. 

It is the responsibility of every citizen to report incidents of crimes to the respective authorities to make the country a better place to live. When citizens start realising their responsibilities and have no fear of whistle-blowing, white-collar criminals will think twice before committing crimes. Eventually, the time will come when we can enjoy true freedom by living in a happy, secure and just society.

The writer belongs to Inland Revenue Service