Withholding tax: NBR detects evasion of Tk 13.5 billion

The income tax wing has detected through field visits the evasion of withholding tax viz. deduction of tax at source worth Tk 13.50 billion this fiscal by different public and private agencies.

Of the agencies, five are state-owned while most others are private companies.

A taskforce of the National Board of Revenue (NBR) detected the unpaid tax after visiting premises of eleven corporate taxpayers.

The 13-member taskforce, headed by first secretary (income tax) Khandoker Khurshid Kamal, was formed in June 2018 as it suspected irregularities in the collection and deposit of tax deducted at source (TDS).

A senior tax official said they would be able to collect around Tk 4.0 billion additional taxes by June next as TDS through the drive.

So far, the tax inspection wing has collected Tk 540 million in income taxes from the corporate taxpayers, known as withholding authorities, he said.

There are over 0.2 million withholding authorities including banks and financial institutions. They are empowered by the revenue board to deduct tax before making payments.

According to income tax rules, the deducting entities get the highest two weeks from the end of a month for depositing the deducted tax to the government exchequer.

The official said if the taxmen have proper logistic support, they would be able to collect Tk 2.0 trillion alone as withholding taxes.

Withholding authorities are legally obliged to deposit TDS collecting from 58 sources, including the payment of bills for the procurement of goods and services, disbursement of salary, commission, interest and dividend.

Currently, around 57 per cent of the income tax in the country comes from TDS.

"During the inspection, we have found many of the taxpayers are not aware of proper deduction of taxes. They are unintentionally skipping deduction of tax at the NBR's prescribed rate," the tax official said.

As per the instruction of the board, each of the tax zones would conduct field inspection in 30 corporate taxpayers while the Large Taxpayers Unit (LTU) do so among 50 corporate taxpayers.

They will have to complete the inspection in May and June, he added.

Tax officials who are conducting the inspection said they are facing problems in carrying out the drive smoothly due to the scarcity of cars and other logistics.

They said taxmen need at least some vehicles to visit the premises of withholding authorities for the inspection.

Neither NBR first secretaries, nor the taskforce members have vehicles to carry out the monitoring drive, they added.

Through field visit, taxmen would scrutinise whether the withholding entities deducted tax at the government's prescribed rates or not.

As per the income tax law, the withholding authorities will have to pay the tax with penalty at a rate of 2.0 per cent a month from their own pockets if they fail to deduct the tax at source.

Revenue officials are also empowered to impose tax on the expenditure, which is usually tax-free.

There are provisions for the punishment, including jail term.

However, the tax official said, initially, taxmen would not impose any penal measures on taxpayers as in most cases they found the tax avoidance unintentional.

Business leaders are also opposed to imposing penalty in case of non-compliance.

Talking to the FE, Md Humayun Kabir, taxation working committee convener of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said taxmen should make the taxpayers aware of proper deduction of TDS instead of imposing penalty.

Companies are collecting taxes on behalf of the taxmen so they should be incentivised for this, he added.

"Taxmen will have to conduct quarterly inspection to make taxpayers aware of TDS as clearing arrears is difficult for them," he said.

Mr Kabir said it would be difficult for the taxpayers to pay the dues in the month of May and June -- ahead of EId-ul-fitr- the biggest festival of the Muslims.

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