Corporates hesitant to confide docs to CAs

Corporate taxpayers appear hesitant about providing necessary financial documents to the chartered accountants for verification, slowing tax-return submission and causing evasion by many.

All of the financial statements have to be verified through Document Verification System (DVS) from this year and no corporate tax returns would be accepted sans such crosscheck, meant for preventing miscalculations.

Time for submission of corporate tax return expired on January 15, 2022 for the current tax year. However, majority of the corporate taxpayers obtained time extension until May 15, as per income-tax law, with approval from taxmen.

A senior tax official said the revenue board was actively considering extension of the time for corporate tax return until June 30 in view of the transition into automated system.

Official sources say the government may revise the corporate tax rate downward in the upcoming budget, to be placed on June 09, to encourage them to submit tax returns showing actual income.

The NBR received some 30,000 corporate tax returns in FY 2020-21 against 167,000 Taxpayer Identification Number (TIN)- holding companies.

As per the income tax ordinance1984, submission of tax returns is mandatory for all companies.

The National Board of Revenue (NBR) had received 23,000 tax returns until April 18, 2022.

According to the Institute of Chartered Accountants, Bangladesh (ICAB), CAs had signed a total of 30,000 financials until May 10, 2022.

"As some of the corporate taxpayers have tendency to conceal their actual turnover to pay less tax, until last fiscal year, they are now shaky to provide all requisite documents," said ICAB president Md Shahadat Hossain.

"Delay in getting supporting documents in time to complete audit has made the process slower," he added.

Until last fiscal year, about half of the audit reports in the corporate tax returns were signed by the CAs while rest submitted to the taxmen signed by others.

The ICAB developed the DVS and launched it on December 2021, as part of preventives against submission of such doctored documents on corporate finances.

The NBR, Bangladesh Bank, Financial Reporting Council and other relevant government entities signed Memorandum of Understanding (MoU) with the ICAB to use the system.

Taxmen would not allow any tax return from corporate taxpayers without DVS verification as per an order of the revenue board.

Tax officials expressed their hope about a significant rise in both corporate tax returns and corporate tax collection, thanks to DVS.

Accounting professionals said many corporate taxpayers were not willing to show actual income in fear of taxmen's possible stance against them crosschecking previous returns.

However, field-level income-tax officers say they have received verbal instructions of the revenue board chief to adopt flexible approach on this year's corporate tax returns.

Some corporate taxpayers and taxmen have expressed concern over completion of audit in due time at higher fees to prepare DVS-verified financial statements or audit report of corporate taxpayers.

To ensure proper compliance with audit standards, the ICAB has taken punitive action against 19 CAs of 13 CA firms, suspending their licences, sources concerned said.

"The ICAB suspects that some of the CAs could not verify the corporate taxpayers' documents after it found them having completed several audit reports within a short time," the ICAB president said.

Earlier, many of the corporate taxpayers used to prepare two or three financials suiting tax and loan purposes.

Preferring anonymity, representatives of a corporate taxpayer said getting loan from banks would be difficult for some corporate taxpayers by showing the audit report submitted to the tax authority.

"Loan-approval requirements should be revised to encourage companies to show actual earning in the tax returns," he added.

Until 2020-21, the CAs had audited some 10,000 to 12,000 financial statements while 30,000 corporate taxpayers submitted their tax returns with CA-signed audit reports.

The ICAB president said, "Possibly the fake signatures were used through copying the CAs' original ones to submit those reports."

He notes that auditing a financial statement is a time-consuming task which needs proper documents from the taxpayers.

"We have found some corporate taxpayers reluctant or unwilling to provide the required documents. Some of them did not come back or refrained from responding after the documents sought," he said about the dilemmas and dithering.

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