The National Board of Revenue has formed a high-powered taskforce to bring all registered public and private limited companies under the tax net, ensure submission of income tax returns and prevent submission of fake audit reports as it found that more than 56 per cent of the firms did not have taxpayers’ identification numbers (TIN).
Even more than 55 per cent business entities having TINs do not pay income tax, it found.
Though the submission of financial audit reports with the income tax returns is mandatory, the revenue board found that more than 50 per cent of the firms filed fake audit reports.
According to the Office of the Registrar of Joint Stock Companies and Firms (RJSC), till July 2020 a total of 1,79,464 public and private limited companies got registration from the office.
Of them, only 78,000 firms have TINs and 1,01,465 did not obtain the TINs, according to the NBR.
The number of total firms, including limited companies, partnership firms and society, registered with the RJSC was 2,45,655 as of July.
Of the companies having TINs, on average 35,000 firms filed income tax returns though, as per income tax law, the submission of tax returns along with audited financial reports is mandatory for the companies.
More than 50 per cent of the firms which filed income tax returns provided fake audit reports in the last fiscal year, officials of the NBR said, referring the data of the Institute of Chartered Accountants of Bangladesh.
Members of the ICAB signed some 17,000 audit reports in FY2020, they said.
Based on the findings, NBR chairman Abu Hena Md Rahamatul Muneem has recently asked the Central Intelligence Cell of the revenue board to form the taskforce to ensure compliance of the companies with laws in the fields of obtaining TINs, filing tax returns and authentic audit reports.
The CIC on Wednesday formed the seven-member taskforce headed by CIC director Shabbir Ahmed.
CIC director general Alamgir Hossain on Thursday told New Age that obtaining TINs and filing tax returns were mandatory for business operation.
‘But we found the overall compliance situation very frustrating as more than half of the firms don’t have TINs, more than half of TIN holders don’t file tax returns and more than half of returns contain fake audit reports,’ he said.
There may be some ineffective companies, but the compliance standards should be higher level, he said.
The taskforce will work to streamline the situation with collaboration of the RJSC and the ICAB, Alamgir said.
According to the NBR notification, the taskforce will identify the companies not having TINs and prepare a work plan to bring them under the tax net.
It will also identify the problems behind noncompliance with rules by the firms in the fields of receiving TINs, filing tax returns and authentic audit reports and it will recommend solutions to the problems.
It will also frame the strategy to check fake audit reports.
Members of the taskforce will collect the required information from the RJSC and ICAB for the purpose.
The taskforce will also monitor the progress of the initiatives to be taken to ensure the companies’ compliance with rules regarding tax matters and regularly provide progress report to the NBR chairman, the notification said.
A member of the taskforce told New Age that they would work to ensure proper revenue collection from the corporate entities and bring discipline in the sector which now contributed around 60 per cent of the total income tax collection.
He said that the NBR found that many companies were operating their business activities, receiving bank loans and purchasing assets using fake TINs.
In many cases, the companies received cash incentives and even embezzled bank loans, the revenue board found.
He hoped that corporate income tax collection would increase at least by Tk 1,000 crore in the current fiscal year of 2020-21 due to the NBR move.
ICAB council member Md Shahadat Hossain told New Age that the institute had also took various measures, including establishment of quality assurance department and collecting data on audit reports from its members, to prevent issuing fake audit reports by its members.
In addition to the alleged generation of fake reports by chartered accountants, companies might also prepare fake audit from outside sources, he said.
The ICAB regularly communicate with the regulators concerned, including the NBR, on the issue, he added.