Many corporate taxpayers submit doctored financials

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Doulot Akter Mala | Published: October 03, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

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Only 31 per cent of companies submit authentic audited financials with their annual tax returns while a remaining large majority allegedly treads byways.     
Submitting financials duly audited by chartered accountants (CAs) is mandatory for all corporate taxpayers under the income-tax law.
According to the Institute of Chartered Accountants of Bangladesh (ICAB), the CA firms audited 12,500 financial statements submitted by companies to the tax authority with their tax returns in 2015. But NBR data show that around 39,000 companies submitted annual income-tax returns during that year.
Tax officials and chartered accountants alleged that a vested quarter is active to tamper with the financial statements attached with the annual tax returns as per desire of the corporate bodies.
Such doctoring of tax documents deprives the public exchequer of a significant amount of corporate tax.
It transpired from discussion with relevant sources that the audited tax returns save the authentic ones are "fake or tampered', not audited by the CAs.
Talking to the FE correspondent, ICAB president Kamrul Abedin FCA said the institute had on several occasions raised its concern over the evasive conduct as it affects corporate discipline.
"The NBR will have to pay attention to raising the corporate-tax revenue by addressing the issues to meet the high tax-revenue-collection target," he said.
He holds hope for resolution of the issue as some major developments have taken place in the NBR in recent times.
This correspondent talked to several tax commissioners in field-level tax offices on the issue of company financials.
One tax commissioner said it is difficult to decipher the fake ones as all of the companies submit their tax returns with audited financial statements with the seals of CAs.
"There is no provision of scrutinising the tax returns randomly. We send letter to the CA firm concerned if any suspicious statement is detected," he added.
In most cases, it has been found that auditor and tax lawyer of the company is the selfsame person, he said.
Another tax commissioner said it is difficult to screen out such anomalies as some influential quarters have been involved in the practice over the years.
Several years ago, a tax commissioner tried to bring discipline in this matter but he was transferred from his post, he mentioned.  
He said the main objective of preparing those audit report by other auditors is to conceal actual income of the company and pay less audit fee.
Humayun Kabir FCA, income tax-subcommittee convener of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said it is a 'big hole' in the country's revenue system.
The government can introduce digital signature database of all CAs to verify their signature, he suggested.
A panel of experts should be formed to verify and look through the financial statements submitted with tax returns, he said.
Abdur Rahim Manzu, member of Dhaka Taxes Bar Association, however, dismissed the allegation of submitting audited financial statements with fake seal of CAs.
"There is no evidence of such allegation. I did not find Income Tax Practitioners (ITPs) or tax lawyers preparing financial statements and duplicating CA's seal," he added.
Maybe, he guessed, some companies go to small CA audit firms to pay less for the audit work.   
Corporate taxpayers contribute a significant part of the tax revenue collected for the public exchequer.
However, the tax authority pinned its hope on the existing limited number of corporate taxpayers for achieving its tall revenue target rather than expanding the base.
Commercial banks, mobile-phone companies, petroleum sector and cigarettes are the major sectors from where the NBR collects the lion's share of corporate tax.             (Concluded)
doulot_akter@yahoo.com