Businesses sidestep Tk 10b in consumption tax during FY ’18

The amount of VAT evasion has almost doubled in a year as the tax collector has intensified audits, officials said.

The VAT Audit, Intelligence and Investigation Directorate detected Tk 10.71 billion in evasion of such taxes during fiscal year 2017-18, up from Tk 5.67 billion a year ago, the data available with the revenue board showed.

During the last 15 months, the wing unearthed VAT evasion worth Tk 20 billion and realised Tk 1.65 billion from businesses.

Talking to the FE, commissioner of the Directorate M Abdullah said the highest evasion took place in the manufacturing sector, followed by banks, insurers and financial institutions.

The directorate realised Tk 574 million in VAT during the first seven months of the current fiscal year against Tk 449 million and Tk 99 million in FY 2017-18 and FY 2016-17 respectively.

Mr Abdullah said there is a huge untapped potential for VAT collection if pursued properly for realisation.

"VAT wing alone can contribute around Tk 2.0 trillion to the public exchequer if the VAT team works with due diligence and required facility," he said.

He said there is only one office of the VAT intelligence team with 75 officials.

With this manpower, it is difficult for the directorate to conduct investigation and trace the suspected evasion, he said.

"We've submitted an expansion plan to the Internal Resources Division (IRD) to set up offices in all divisional headquarters," he said.

In the proposal, the directorate has also asked for a raise in manpower to 1,228 coupled with the establishment of a forensic laboratory.

A forensic lab is necessary for the intelligence team to decode the passwords of business accounts server, seized by the VAT officials.

"Through different drives, we seize the servers of suspected businesses. But VAT officials found it difficult to decode their passwords to access the data," he said.

Nine teams of the directorate are currently working on uncovering VAT evasion.

So far, the directorate has conducted raids in Minister Hi-tech Park Limited, AJR transport, Kaisar International (IPS manufacturer), AST Beverage, Sanita Ceramic, Meghna Tobacco, Samuda Chemical, and the Dhaka International Trade Fair.

In FY 2017-18, the wing audited and inspected 287 businesses out of its selected 570 enterprises, including banks, insurance firms, manufacturing units, service providers, clubs and trading houses.

Of them, it has audited nine banks, 15 insurance companies, 17 manufacturing units, three off-dock companies and two service providing businesses.

The wing has conducted investigations in 52 organisations enjoying bonded warehouse facility, two businesses under trade VAT and four clubs.

It has also inspected 20 manufacturing units and 15 services and four business establishments.

Some 287 companies also faced patrolling by VAT teams last year.

Experts said businesses evade bulk of VAT in connivance with tax officials.

Consumers are paying their VAT, but some businesses do not deposit it to the government coffer , thus maximising their profits.

According to the NBR data, VAT collection faced the highest shortfall of around Tk 115 billion against its target in the first six months of the current fiscal year.

The directorate was formed in 2007 after abolishing the Customs, Excise and VAT Inspection Directorate.

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