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Beware of e-TDS spyware

Failsafe device probing payroll tax-dodging

Concealing corporate income thru miscalculations also being forestalled

| Updated: April 10, 2022 16:37:28

Failsafe device probing payroll tax-dodging

Evading payroll taxes is being made difficult for both employees and employers as taxmen start monthly scrutiny of salary payout through electronic tax deduction at source (e-TDS) system, as a measure of enhancing government revenue.

Income-tax authority thus moved to boost payroll tax collection as a first step utilising this type of tax spyware to check tax evasion by local and foreign employees.

Also, concealment of actual income of corporate taxpayers would be prevented as the taxmen have started crosschecking tax deduction from salary income by employers every month with the help of the automated system, launched last October as part of tax reforms.

The taxmen have set a target to register 5,000 companies under the e-TDS system, mopping up Tk 10 billion in taxes by June 30, 2022.

Until March 30, some 20,000 salaried people, who receive salary after deduction of source tax, had been brought under the e-TDS database.

The widely practised tax- evasion tactics of receiving a part of salaries in cash to conceal the actual income of employees would be minimised, tax officials say.

Tax officials find the e-TDS system an effective tool to bring all salaried people under tax net with the help of automated data.

As per section 108 of the Income Tax Ordinance 1984, corporate taxpayers have to submit a salary report twice in a tax year with the details of at- source-tax deduction from their employees.

Employees or salaried persons, in many cases, allegedly evade taxes showing less remuneration while employers conceal actual expenses or turnover to dodge payment of corporate taxes, the officials add.

As per the Income Tax Ordinance1984, companies have to deduct tax from salaries of the employees and deposit the money with the public exchequer.

Individual taxpayers show the TDS in their tax return at the yearend as their paid taxes.

Through verifying e-TDS data, taxmen would now be able to know what is the actual salary received by employees.

Also, the taxmen have brought some 4,000 vendors/persons under its database who receive bill after TDS.

Tax officials suspect a large number of well-off people went unnoticed for lack of having an automated database to monitor source-tax deduction.

Many of them refrained from showing all of the incomes even though they have paid TDS on that.

According to a primary estimation, income-tax officials assume an annual loss of tax revenue in the form of direct tax worth Tk 250 billion for not having e-TDS system in place thus far.

The National Board of Revenue (NBR) received a total of Tk 510 billion as Tax Deducted at Source (TDS) from the income taxpayers in the fiscal year 2020-21.

The newly developed e-TDS system started tapping the potential for much more by integrating with the banks and other deducting authorities.

"We have found many of the taxpayers' payable tax threshold has been revised to upper ceiling after they come under e-TDS system," said Mohammad Jahid Hassan, income tax commissioner of Taxes Zone-6, who is leading the e-TDS-implementation team.

In Bangladesh, payroll tax or withholding tax contributes only 3.0 per cent of total TDS, which is around 30 per cent in neighboring countries, he added.

Some 3,915 companies had registered in e-TDS system until March 31, 2022. Of them, 1,200 companies have availed the e-TDS system.

The NBR collected Tk 2.71 billion worth of taxes against the e-TDS deposits in this period.

Mr Jahid feels that they need to impart training to the taxpayers on use of the e-TDS system brought about in the digitization process in taxation.

There are some 0.3 million deducting authorities in both public and private sectors that are empowered to deduct the TDS from taxpayers as per the Income tax Ordinance.

"So far, we could reach around 60,000 tax- deducting authorities to bring under e-TDS system," Mr Jahid said.

"E-TDS system has established connectivity with a-chalan and it would also integrate with the iBAS++, iVAS, ASYCUDA world of customs and so on. Hence, it will act as the backbone of the e-filing system in coming days," he added.

Large taxpayers have paid Tk 4.99 billion TDS in the current FY.

The NBR launched e-TDS system in October last with a goal to minimize physical visit to tax offices.

The NBR collects some 60 per cent of its direct taxes through e-TDS.

Officials feel that investment in e-TDS is needed to make the system smooth and establish interconnectivity with other entities.

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