Massive Sales Tax Evasion and MoneMassive Sales Tax Evasion and Money Laundering Scandal Rocks Pakistan’s Pharma Industryy Laundering Scandal Rocks Pakistan’s Pharma Industry

ISLAMABAD: In a shocking revelation, it has come to light that the pharmaceutical industry in Pakistan has been involved in a large-scale tax evasion scheme and money laundering activities, causing a staggering loss of over Rs 500 billion to the government. The evasion primarily targeted herbal medicines, medical devices, cosmetics, over-the-counter drugs, enlisted medicines, therapeutic goods, medical devices, and veterinary medicines.
The scheme, which has been ongoing since 2014, saw the collusion of the Pharma Industry with the Drug Regulatory Authority of Pakistan (DRAP). Import clearing officers associated with DRAP, without the necessary authorization from the federal government, manipulated the documentation in a way that exempted the aforementioned products from General Sales Tax (GST).
Pakistan Young Pharmaceutical Association (PYPA) has written a letter to Prime Minister Shahbaz Sharif to investigate the irregularities. This massive tax evasion not only resulted in a substantial loss to the government exchequer but also left essential medicines unregulated and their prices uncontrolled. Patients, especially those who rely on enlisted therapeutic goods, medical devices, cosmetics, and over-the-counter drugs, have been subjected to exorbitant prices, further burdening their healthcare expenses.
Furthermore, it has been disclosed that DRAP officials have been accepting foreign tours sponsored by pharmaceutical companies, potentially indicating direct bribery. These unauthorized trips raise serious concerns about the impartiality and integrity of the regulatory authority.
Additionally, the investigation has uncovered a significant money laundering operation conducted through banking channels and other illicit means. It has been estimated that the import indenting companies, in collaboration with DRAP and the Pharma Industry, have been involved in money laundering amounting to approximately Rs 150 billion annually. One such company, M/s Neon Chemicals based in Lahore, alone has reportedly laundered over Rs 200 billion since its inception.
In light of these grave findings, it is imperative that immediate action be taken to rectify the situation. The PYPA has recommended following steps:
1. Initiate the collection of General Sales Tax from the Pharma Industry on herbal medicines, medical devices, cosmetics, over-the-counter drugs, enlisted medicines, therapeutic goods, medical devices, and veterinary medicines.
2. Recover the entire amount of evaded General Sales Tax since 2014 from both the Pharma Industry and DRAP.
3. Implement stringent measures to prevent money laundering through banking channels and other illicit means.
4. Thoroughly investigate the import businesses of all indenting companies, with a particular focus on M/s Neon Chemicals in Lahore.
5. Retrieve all funds that have been unlawfully transferred out of Pakistan through money laundering.
6. Reclaim the Rs 200 billion reportedly laundered by M/s Neon Chemicals in Lahore.
7. Establish price regulations for all enlisted therapeutic goods, over-the-counter drugs, medical devices, and cosmetics.
8. Cease the practice of allowing DRAP officials to partake in foreign tours sponsored by pharmaceutical companies.
9. Commence a criminal probe into the tax evasion since 2014, money laundering activities of pharmaceutical companies and indenting companies, the absence of price regulations for enlisted therapeutic goods, over-the-counter drugs, medical devices, and cosmetics, as well as the sponsored foreign tours of DRAP officials.
The shocking revelations have sent shockwaves through the country, raising concerns about the integrity of the pharmaceutical industry and the regulatory authorities involved. The government is now under pressure to take swift and decisive action to recover the lost revenue, hold the responsible parties accountable, and ensure the welfare of the general public, particularly those who rely on affordable and regulated medicines