Consumption tax from large banks shows paltry growth

Collection of consumption tax from 17 large commercial banks registered a paltry growth in the past fiscal year for no significant changes in taxation measures and their client base, officials say.

In the FY2021-22, the aggregate value-added tax (VAT) collection remained stymied, contributing to the year's overall tax-revenue-collection shortfall.

Analysing revenue-collection data, it has been found that VAT receipt from domestic sources remained poor compared to its potential -- showing a growth of only 11.19 per cent. Average expected growth is usually over 15 per cent.

However, the National Board of Revenue (NBR) achieved 15.51-percent growth in tax-revenue collection in FY'22, leaving an around Tk 300-billion shortfall from the targeted Tk 3.3 trillion.

The consumption collection from the top commercial banks posted a nominal 0.56-percent growth over the corresponding year, according to compiled data available at the Large Taxpayers Unit (LTU) of the VAT wing under the NBR.

The banks, mostly private and only three state-owned, paid Tk 29.71 billion in VAT, Tk 160 million higher than that of the previous year, the data reveal.

However, in FY 2019-20, those commercial banks had paid Tk 20.66 billion worth of VAT to the public exchequer.

According to the VAT and Supplementary Duty Act-2012, commercial banks are authorized to collect the value-added tax at a rate of 15 per cent and excise duty on the basis of deposited amount from its clients against delivery of services from its clients and deposit to the public exchequer.

Agrani, Sonali, Janata, Pubali, Brac, Islami Bank, AB Bank, Dhaka Bank, Dutchbangla, Uttara, Prime Bank, Standard Chartered Bank, National Bank, Premier Bank, Bank Asia, HSBC, Southeast Bank are listed under the LTU-VAT unit.

Analysing trend in VAT payment by large commercial banks under LTU, the FE correspondent finds that VAT collection showed a marginal growth in FY 2018-19 and 2019-20 respectively. However, the collection from those banks jumped by Tk 38.42 billion in FY'21.

Of the banks, four had paid less VAT than that of previous year. VAT payment by Standard Chartered Bank dropped by 44.77 per cent last year compared to that of the previous fiscal.

However, the bank is still in the second position among the large private commercial banks in terms of volume of VAT payment worth Tk 3.19 billion.

Responding to the FE's query on decline in payment, Naser Ezaz, Chief Executive Officer of Standard Chartered Bank Bangladesh, said the drop in VAT payment in FY'22 was due to Tk 2.59 billion worth of VAT deducted at source from accumulated milestone payments specifically related to large projects remitted for two clients in previous year.

He said, "VAT payments for FY'22 remained largely unchanged at the usual levels of a regular year."

According to LTU's data, Agrani Bank's VAT payment declined by 13.31 per cent in the last fiscal compared to that of previous year.

Payment by Bank Asia also dropped by 5.73 per cent while Premier Bank's VAT payment declined by 1.49 per cent.

Islami Bank paid the highest amount of VAT worth Tk 4.19 billion while Sonali Bank Tk 3.27 billion. Dutchbangla Bank paid Tk 2.56 billion, posting a 15.02-percent growth.

BRAC Bank paid Tk 1.86 billion last year, 18.15 per cent higher than previous year's.

The LTU collected Tk 524.33 billion in VAT from large taxpayers in FY2021-22. However, VAT payments marked a shortfall of Tk 116.05 billion against its target.

Explaining the drawbacks, LTU-VAT commissioner Wahida Rahman Chowdhury said the unit has a large amount of arrears with state-owned entities, especially with Petrobangla.

A couple of drives in the last month contributed to 6.46-percent growth in VAT collection of the unit, she added.

"We had to take some stern actions, including freezing bank accounts of some large companies, to realize long-pending arrears," she said.

The number of large taxpayers of LTU declined to 111 from 144 but VAT collection had grown sharply in the last three years.

The unit collected Tk 420.53 billion in VAT in FY'20 followed by Tk 492.51 billion in FY'21.

LTU contributes more than half the total VAT receipts by the NBR.

Last FY, the LTU collected Tk 524.33 billion out of Tk 1.08-trillion VAT collected from entire field offices across the country.

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