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Some two-thirds of the corporate-tax returns may need general amnesty or get penalized by taxmen as their current tax year's pre-verified financial statements are unlikely to match with previous ones.
From the current tax year, all of the corporate taxpayers have to submit Document Verification System (DVS)-certified financial statements audited by chartered accountants (CA) with their tax returns mandatorily.
Until the last fiscal year, the National Board of Revenue (NBR) had received around 30,000 corporate-tax returns.
Although CA-audited financial statement is mandatory with each of the corporate-tax returns, according to the Institute of Chartered Accountants of Bangladesh (ICAB), CAs usually certify only 10,000 to 12,000 financials adjoined to corporate-tax returns a year.
These data show nearly 20,000 or two-thirds of the financial statements may come with corrected financial statements this year using the ICAB-developed DVS.
Tax experts say the corporate taxpayers may need general amnesty from the tax department this year as taxmen would accept only DVS-verified financial statement with returns.
Most of the corporate taxpayers would submit their tax returns by January 15.
Both CAs and taxmen allege that some of the corporate taxpayers, who previously submitted fake audit reports to evade tax, submitted tax returns bypassing DVS-verified audited financials "managing tax circle offices or through underhand dealings".
They suggest strict punitive action and monitoring to check the unethical practice to ensure single audit report for a company for all purposes.
A top official of the revenue board's income-tax wing, preferring anonymity, said the NBR might consider case-to-case amnesty on previous audit reports of corporate taxpayers who would submit DVS-verified ones this year.
"We will accept DVS-verified corporate-tax returns from them without question," says a field-level tax official.
He says usually taxmen refrain from auditing the tax returns if 15-per cent higher income shown in the statement.
"In general, we audit less than 2.0 to 3.0 per cent of tax returns," he adds.
Another tax official said the NBR might not make public even though it offers amnesty as the matter may spark criticism.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh (PRI), strongly recommends allowing the corporate taxpayers to correct their financial statements this year with the help of DVS as such amnesty would be required for a single time.
"Taxmen can apply 'Grandfather clause' in that case to offer general amnesty allowing corporate taxpayers to submit corrected tax returns once," he says.
Former member of the income-tax wing Aminur Rahman thinks a complex situation may be created this year unless the NBR offers amnesty on previous tax returns' financial statements which were cooked or not certified by CAs.
"From this year, all of the corporate taxpayers will have to submit DVS-verified audit report and the report would not match with the previous year's one," he says about a sure mismatch in such cases.
A tax return contains income, expenditure, assets and liabilities and other details that regular taxpayers, both individual and corporate, prepare in keeping with previous year. Any significant change in financials usually prompts taxmen to select tax files for auditing to check tax evasion.
The ICAB introduced DVS on December 1, 2020. Until December 31, 2021, some 323 CAs had registered under DVS while the number of registered firms under the verification system is 150.
President of the ICAB Md Shahadat Hossain holds the hope that authentication of the auditor's report must be ensured and submission of fake auditor's report must be stopped through DVS.
"It is responsibility of the relevant officials of the NBR to check whether any audit report has DVC (document-verification code)," he says.
He, however, lays emphasis on quality of audit and auditor's report as proper audit in compliance with auditing standards is important too.
"NBR has the right to check the quality of financial statements submitted to it and if there are deficiencies, they can take measures accordingly," he observed.
The ICAB conducts quality-assurance review of all auditors. Any auditors, audit firms and the audited financial statements can be reviewed by the quality-assurance department or investigated by ICAB's enforcement department anytime.
"Due to DVS, there is no scope to deny the responsibility for conducting audit and hence the responsible auditor or audit firm shall be subject to penalty for lack of quality once indentified," the ICAB president says.
"We believe that quality of audit will be enhanced ultimately in significant manner because of DVS."
ICAB council member Snehasish Barua said the NBR could make the corporate taxpayers by slapping a penal tax to show their previous undisclosed assets that they had concealed so far.
"The tax authority can consider accepting the current year's financial statement without any question as it's a transition period of corporate-tax compliance in Bangladesh with DVS," he adds.