Large companies foresee poor sale, tax payment

Most of the large taxpayers are apprehending a sharp slide or poor growth in their sale and probable payment of consumption tax in the current fiscal year (FY), 2020-21.

They have apprised the Large Taxpayers Unit (LTU) under the National Board of Revenue's (NBR) VAT Wing of the dismal business activities due to the COVID-19 pandemic since March.

The LTU contributes 65 per cent of the NBR's total VAT collection. There are some 170 large companies under the unit.

An official concerned said the large companies under the LTU, in response to its query, gave a projection of their possible sale and month-wise revenue payment in FY 2020-21.

Earlier, the LTU sent letters to its all corporate taxpayers, seeking details on their projection of sale or supply and revenue data for current FY.

Responding to the letter, the large taxpayers, including two multinational cigarette companies, mobile phone companies, cement companies, banks, insurers, hotels, restaurants and pharmaceuticals, apprised the unit of their possible financial condition in FY 2020-21.

The official also said the ongoing COVID pandemic has taken a toll on all types of businesses, and it may continue further, affecting the internal revenue collection.

The government has set a target of Tk 700 billion for LTU VAT, expecting a 63 per cent growth for the current fiscal year compared to that of the last FY.

"It will be difficult to achieve the target with the existing financial health of the large taxpayers," he noted.

Among the sectors, revenue from tobacco contributes majority of the LTU's earning. There might be eight to 10 per cent drop in sale of cigarettes in current FY, industry insiders said.

The situation slightly improved in the months of June and July. But, British American Tobacco, Bangladesh (BATB), which pays the highest amount of VAT, has projected only 1.0 per cent growth in the current FY over the corresponding year, said a senior VAT official.

Besides, the NBR expected a hefty growth of mobile phone and pharmaceutical sectors, whereas their growth will not be as impressive as per expectation.

Pharmaceutical sector is facing crunch of raw materials in procuring those from their main source - China. So production of drugs might face a blow in near future, if immediate steps are not taken, the official further said.

On the other side, mobile phone operators said use of mobile phone went down by at least 20 per cent in the COVID pandemic due to slowdown of businesses' activities.

The official noted that people do not have enough money in their hands to spend, which is reflected in the drop of revenue generation from tobacco and mobile phone etc.

VAT collection from hotels and restaurants almost stopped, as those are giving nil returns now, he added.

Earlier, the LTU wrote in the letter to the large companies that the economic activities will be carried out in a changed way now due to the COVID-19 pandemic.

"The future business plan of your company is supposed to be devised on the basis of this analysis," it mentioned.

It is necessary to know the possible sale or supply and revenue data of FY 2020-21 to prepare a future action plan for achieving the revenue collection target, the letter added.

Officials said there might be Tk 800 billion shortfall in the total revenue collection target in the current FY.

Shehzad Munim, Managing Director of BATB, said tax officials put pressure on large taxpayers for achieving the ambitious revenue collection target.

"The large taxpayers have to face queries about their previous tax claim, and each of the tax demand accounts for a large amount of arrears," he added.

The LTU officials said they are allowing large taxpayers to pay tax in small instalments, considering the present situation, as any harsh measure may affect the businesses further.

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