2 years ago

Many Bangladesh companies skip 'costly' tax compliance

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Corporate tax returns submitted annually in Bangladesh have staggered around only 30,000 during the last seven years despite its economy having nearly tripled in size during the period, as many companies skip costly compliance, sources say.

Official statistics show the size of the country's economy has grown from Tk 13.44 trillion to Tk 34.44 trillion over the period, but corporate-tax submissions have got stymied.

Income-tax-return submission is mandatory for all companies, stating their annual income, expenditure, asset and other details.

Although the number of tax-registered companies as well as corporate-tax collection has grown sharply since 2013, return-submission trend remained low, showing a dismal state of corporate-tax compliance in Bangladesh compared with many countries.

The mismatch came clear through an analysis of last seven years' data of return submission conducted by the FE to figure out what has gone wrong in the corporate world as regards taxing.

Out of 167,047 TIN (Taxpayer Identification Number)-holding corporate taxpayers only 29,785 had submitted their tax returns till June 30, 2021.

On the basis of data available since Fiscal Year (FY) 2013-2014, the FE correspondent found out that such low-rated corporate-tax-return submission had continued for years.

However, the number of corporate TIN-holders grew by 114.66 per cent last FY but return submission didn't show that quantum leap.

The TIN is a multipurpose tool, necessitated in availing many official services, but return submission and overall tax compliance involve a cumbersome process by many accounts.

Corporate-insiders say high cost of corporate-tax compliance, and complex manual process and hassle of submission of huge papers with tax returns discourage them from submitting tax returns.

Currently, corporate taxpayers are required to submit 26 types of documents, mostly in manual form, in a year to the tax department.

Talking to the FE, some of the corporate taxpayers resented that they have to remain busy with tax-related work round the year to meet compliance requirements.

Tax consultant and member of the Institute of Chartered Accountants of Bangladesh (ICAB) Jasim Uddin Rasel says cost of corporate-tax compliance is high in Bangladesh as a mid-level company needs to spend around a million taka as additional expenses for tax consultants and other purposes annually for submission of tax returns.

Responding to a query, council member of the ICAB Md Humayun Kabir, who was also former president of the Institute and taxation subcommittee convener of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said many companies obtain registration but refrain from submission of tax returns as they do not start formal operations.

"However, all of the corporate taxpayers are paying some form of advance income tax so the tax authority should take initiative to simplify return-submission process to encourage them," he adds.

Also, many companies turned dormant while some turned sick amid this all-upsetting COVID-19 pandemic.

Abul Kasem Khan, chairperson of Business Initiative Leading Development (BUILD), observes that taxmen are imposing burden on honest taxpayers to save tax-evaders, and that is driving away many companies from getting caught on tax net.

He says startup businesses prefer not to come under tax net due to high burden of source tax and cost of tax compliance.

"I have to appoint one auditor and a tax consultant for tax purpose. Cost of tax compliance is quite high in Bangladesh," he rues.

Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), says the NBR should give relief to the start-up companies for at least three to five years from auditing their tax returns to encourage return filing.

He also suggests automation of return submission and the lowering of the higher cost of corporate-tax compliance along with follow-up of the registered companies.

Executive Director of the Foreign Chamber of Commerce and Industry (FICCI) TIM Nurul Kabir finds overall tax-management system not efficient compared to neighbouring or developed countries and that has been reflected in poor tax-GDP ratio of Bangladesh.

"Our poor tax-GDP ratio also indicates there is extremely large number of eligible taxpayers not paying their taxes properly," he says.

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