The Financial Express

VAT intel steps in to spot tax-evading 'ghost' cos

DOULOT AKTER MALA | Published: February 16, 2020 09:48:51 | Updated: February 16, 2020 13:54:13

Picture used for illustrative purpose only — Collected Picture used for illustrative purpose only — Collected

The VAT intelligence team has asked banks to provide details of private companies having yearly transaction or balance of Tk 1.0 billion or more.

The move is intended to locate "ghost" firms who evade taxes.

Manufacturing companies, banks, insurance and leasing companies are excluded from this scrutiny, however.

The VAT audit, intelligence and investigation directorate sent letters to all banks and the Bangladesh Bank in this connection on February 10.

The intelligence wing under the VAT department of the National Board of Revenue, NBR, asked the banks to provide detailed information about such firm for a period between January 1, 2014 and December 31, 2019.

The banks will have to provide the information in a prescribed format within a week.

The details include full contact address, VAT registration of Business Identification Number, Taxpayer's Identification Number, and company registration number.

Talking to the FE, director general of the intelligence wing Syed Mushfequr Rahman said the scrutiny will be done to detect "name only" firms.

"For the first time, we've launched such audits as per legal provisions of the new VAT law," he said.

The intelligence wing has requested the central bank to instruct the banks to comply with its request, he said.

Currently, the wing has no data on how many private entities are registered with the VAT wing and the volume of tax payment, he said.

The VAT wing would be able to get a real picture with the help of the furnished information by the commercial banks, he added.

According to the VAT law, the commercial banks will have to provide the information requested by the VAT department. Even more, the VAT wing can take penal action against the bank officials in case of non-cooperation.

In the letter, the wing said it has taken up a programme to ensure proper VAT payment by big companies.

"It is necessary to audit these types of companies. The process would be conducted through risk-management system," Mr Rahman told the FE.

Some trading and brokerage companies are believed to be transacting in the informal channel to evade VAT and taxes.

Furthermore, many companies are not submitting VAT returns despite having BIN. Currently less than 50 per cent BIN holders submit VAT returns.

"We will bring the companies with an average annual transaction or balance of Tk 1.0 billion or more in the last five years under scrutiny," he said.

Despite having potentials, VAT collection remained poor in the country due to the absence of proper steps to check evasion.

Even increased consumption commensurate with a rise in per capita income has had little impact on VAT collection.

Analysts support the step, saying it will help unearth the way taxes are sidestepped.

Talking to the FE, senior research fellow of the Center for Policy Dialogue, or CPD, Towfiqul Islam Khan said VAT evasion is high in Bangladesh and such steps can track the untapped potentials.

But he argued the initiative should be research-based rather than administrative steps to make sure that genuine business people are not harassed.



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