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Corporate tax receipts exceed target

| Updated: July 01, 2021 18:13:47


Corporate tax receipts exceed target

The tax authority has surpassed its target for tax collection from large taxpayers in the just-concluded fiscal year (FY), thanks to the money whitening scheme and withholding tax collection.

According to provisional data of the Large Taxpayers Unit (LTU) under the income tax wing, corporate and large individual taxpayers paid taxes worth Tk 240.11 billion until June 30, 2021.

The target was set at Tk 240 billion for FY 2020-21 (FY 21) for the unit - largely dependent on taxes from the banking sector.

The actual collection of LTU in FY 2019-20 was Tk 208.38 billion. Tax collection of LTU grew by 15.38 per cent in FY 21. However, the LTU missed its targets for FY 2018-19 and FY 2019-20.

Talking to the FE, Commissioner of the LTU under the income tax wing Md Iqbal Hossain said the opportunity availed by the undisclosed money holders contributed a significant amount of taxes in the just concluded FY.

He said more than Tk 1.0 billion taxes had been mobilised from the undisclosed money holders, who formalised income by paying a 10 per cent flat rate of taxes.

The government received a record amount of undisclosed income in the just concluded FY - the amount is almost equivalent to the amount whitened in the last fifteen years.

Until May 25, some 10,404 people disclosed their money availing of the blanket opportunity offered on July 1, 2020.

The National Board of Revenue (NBR) has received taxes worth Tk 14.45 billion, against some Tk 144.59 billion whitened under the opportunity.

From FY 2005-06 to FY 2019-20, a total of Tk 145.95 billion undisclosed income has been formalised under such opportunities.

The LTU commissioner also pointed out the realisation of arrears and the upward trend of withholding tax collection as major reasons for achieving the target.

"All-out efforts of the LTU officials under the guidance of NBR chairman Abu Hena Md Rahmatul Muneem and taxpayers' friendly environment in the unit have encouraged payment of the actual amount of taxes," he said.

The government set a realistic target for LTU in FY 2020-21, down by 11.66 per cent from the previous FY, considering deteriorating financial health of the large companies.

LTU officials said they were yet to compile sector-wise data to see the growth of corporate tax collection from the banking sector.

In the 2020 calendar year, operating profit of the majority of the private commercial banks (PCBs) shrunk mainly due to the impact of Covid-19 and implementation of the single-digit interest rate.

During the last two budgets, the government has slashed corporate tax rates to bring it down in a bid to attract investment.

Field-level officials said the cut of corporate tax rate had not left any significant impact on revenue collection due to upward adjustment of tax at source or withholding taxes.

According to an estimate of accounting professionals, overall tax incidence on corporate taxpayers went up due to imposition of withholding taxes without giving any scope of refund under a provision of minimum tax, section 82 C of the Income Tax Ordinance-1984. NBR officials, however, expressed doubt over getting an impressive response similar to just concluded FY on the newly offered black money whitening scheme with 25 per cent tax and 5.0 per cent penal tax for current FY.

Executive Director of the Policy Research Institute (PRI) Dr Ahsan H Mansur said the performance of LTU was impressive amid this pandemic and with no significant reform or automation initiatives taken.

It is not measurable at this point whether it is effort-based performance as taxmen do not define it, he added.

Overall revenue collection may achieve 12 to 15 per cent growth in the just concluded FY and LTU's collection is aligned with this, he added.

President of the Dhaka Chamber of Commerce and Industry (DCCI) Rizwan Rahman said in the Covid time, large businesses were less affected than the Micro, Small, Medium Enterprise (MSME) businesses.

"Most large businesses are compliant and traceable and that's why collection from them is always reasonably high," he said.

It is always seen from the revenue collection trend that large businesses contribute the lion's share of NBR revenue collection - around 70 per cent; from that perspective, the revenue collection target was met, he added.

On the other hand, source tax in the import stage, local supply like Advance Income Tax, Advance Tax also played roles in realising revenue despite having pandemic stress on businesses, he said.

Source tax affects the cash flow of business and profit making, he said.

"Whether businesses are making losses or profits, source tax is charged which is a contrast to the fundamentals of income tax principle.

Source tax is an aggressive tool of revenue realisation of the government," he said. He demanded that the government reduce source tax rationally and shift dependence on it.

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