FT Online

Published:
2019-03-31 10:13:07 BdST

Source tax deductionOnsite audit soon to find corporate tax dodgers


he National Board of Revenue (NBR) is set to start an onsite inspection from the next month to cross-check whether corporate taxpayers' source tax deduction matches with expenditures, officials said.

Taxmen will visit premises of 'withholding authorities' such as public and private companies, financial institutions, development project implementation offices, non-government organisations and offices of contractors and other entities, they said.

Withholding authorities are legally obligated to deposit tax deducted at source (TDS) collecting from 58 sources including the payment of bills for the procurement of goods and services, disbursement of salary, commission, interest and dividend.

 

Currently, more than half the income tax in the country comes from source deduction.

An NBR monitoring team will check the taxpayers' compliance with collection of tax deducted at source as per the income tax ordinance-1984.

The board has already directed field-level tax officials to audit the companies' expenditures to find out proper deduction of tax and depository to the public exchequer within the stipulated time.

Officials said there are several thousands of withholding entities across the country that are legally bound to collect such taxes and deposit them with the public exchequer.

Through field visit, taxmen would scrutinise whether the withholding entities deducted tax at the government's prescribed rates or not.

Taxmen may take legal steps if withholding authorities do not extend cooperation.

As per the income tax law, the withholding authorities will have to pay the tax with penalty at a rate of 2.0 per cent per month from their own pockets if they fail to deduct the tax at source.

There are also provisions of punishment, including jail term.

Tax officials will also impose tax on the expenditure, which is usually tax-free upon failure of deduction.

An NBR taskforce, headed by its first secretary (tax monitoring and training) Khandokar Khurshid Kamal, has already provided training to taxmen of 15 zones in Dhaka on source deduction audit.

On a pilot basis, the taskforce team has already inspected some private offices.

A senior tax official said expenditure of the corporate taxpayers is the main sources to ferret out whether entities made the compliance.

From any payment of bills, salaries or other expenditures, taxmen would be able to detect flaws in deductions, he said.

The NBR formed the 13-member taskforce in June 2018, sensing irregularities in collection and deposit of such tax.

Taxmen believed that some companies dodged tax by not deducting the source tax from its expenditures or deducting at lower rate or making unusual delay in depositing.

As per income tax rules, the deducting authorities get the highest two weeks from the end of a month for depositing the deducted tax to the government exchequer.

Earlier, taxmen had conducted drive in some of the government offices and detected huge irregularities on deduction.

Following the detection, the NBR decided to widen its scrutiny and conduct audit on the premises of the withholding authorities.

As per instruction NBR chairman Md Mosharraf Hossain Bhuiyan, the taxmen planned to launch the drive in a bid to increase tax collection and offset the ongoing tax collection shortfall, officials said.

They said the share of such tax is around 90 per cent of the total collection in developed countries like the United States and the European Union countries.

Snehasish Barua, convener of taxation and corporate laws committee of the Institute of Chartered Accountants of Bangladesh (ICAB), said there is a huge untapped potential in collecting higher taxes from source tax, but the NBR should conduct sector-wise analysis rather than massive inspection in all withholding authorities.

There might be irregularities in deducted tax collection from distributors and salary expenses, he said.

He said the genuine taxpayers might face harassment by the corrupt taxmen if the Board conducts the drive without prior research, he said.

Banks and multinational companies are mostly complaint with such tax collection and deposits, he added.

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