To scrutinise any mismatch between the paid and actually payable value-added tax (VAT), the revenue authority is considering launching audits of the financial statements filed by global technology giants along with their VAT returns.
Currently, 12 non-resident companies, including Google, Facebook (now Meta), Netflix, LinkedIn, Microsoft, Amazon, Zoom and Zoho, submit VAT returns to the National Board of Revenue (NBR).
Official sources said that the NBR recently instructed the Central Intelligence Cell (CIC) to examine tax-payment issues of global tech leaders to verify their compliance.
In the fiscal year 2022-23, the companies paid Tk 599 million in VAT under VAT South Zone - the jurisdiction for these companies.
Officials said VAT payments by global companies increased by 11.32 per cent last year compared to the corresponding period in the previous year.
The companies, who have been submitting VAT returns during the last two and a half years since FY 21, may face audits very soon, they said.
Zoom and Zoho started filing VAT returns in February and April 2023, respectively, in Bangladesh. The other 10 non-resident companies, including Google Asia Pacific Pte Limited, LinkedIn Singapore Pte Ltd, Amazon Dot.com services, Netflix Pte Ltd, Google Ireland Limited, Microsoft Regional Sales Pte Ltd, Facebook Technologies Ireland Limited, Facebook Payments International Ltd, Facebook Ireland Ltd and Amazon Web Services, have been submitting VAT returns since FY 2020-21.
However, officials acknowledged limitations due to not having sufficient expertise to examine the companies' transactions. The companies do not have any permanent establishments in Bangladesh.
"Time has come to check the statements of the companies. We may start auditing their files shortly after getting approval of the NBR high-ups," said Showkat Ali Saadi, commissioner of VAT Zone (South), who is authorised to collect VAT from the companies.
Usually, VAT returns are audited after three consecutive years from the first submission date to provide VAT officials with some information on a company's financial transactions.
"The audit process could have been better if the companies had any permanent establishments in Bangladesh," said Showkat Ali.
"We can still audit the VAT returns of the non-resident companies based on the information provided in their VAT returns," he said.
Officials said they have to accept the VAT declared or paid by the companies due to the limited scope for cross-checking.
However, Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), said the NBR can hire foreign experts if needed to scrutinise the files of non-resident tech companies.
"Forensic investigation could be conducted so that the VAT authorities can identify mismatches between actual sales and paid VAT of the companies," he said.
In 2022-23, NBR made obtaining a Taxpayer Identification Number (TIN) mandatory for non-resident companies, but none have completed the registration process yet, he added.
The NBR could gather more data on the companies' business operations if tax officials had the opportunity to analyse tax returns along with payable VAT, he noted.
When the companies began paying VAT in FY 20-21, the government received around Tk 130 million, including arrears, in the first six months. In FY 2021-22, the companies paid VAT worth Tk 530 million, according to official data.
Last year, Facebook Ireland Ltd (now Meta Platforms Ireland Ltd) paid Tk 324 million in VAT, followed by Google with Tk 123 million, Amazon Web Services with Tk 56 million, Netflix with Tk 39 million and LinkedIn with Tk 24.9 million in VAT.
Bringing tech giants under the VAT net in Bangladesh was a challenging task since they lack permanent establishments here. The NBR had to amend provisions of the VAT law, prepare separate VAT return forms and other documents to facilitate VAT payment by the companies.
Industry insiders said although the highest VAT rate in Bangladesh is 15 per cent, consumers of tech companies end up paying around 31 per cent due to double taxation.
They said consumers of tech companies pay VAT, while banks also deduct the VAT at the time of repatriating money to their parent companies in other countries.
The NBR is expected to issue a rule determining the process of VAT payment by the tech giants, but it has not been issued in the last two and a half years, they said.
According to Statista, in the second quarter of 2023, Google's revenue amounted to over US$ 74.3 billion, up from the $69.1 billion registered in the same quarter the previous year.
Data from the premier research platform Macrotrends indicated that Meta Platforms' revenue for the twelve months ending June 30, 2023, increased by 0.93 per cent year-over-year.
Amazon's annual revenue for 2022 increased by 9.4 per cent from 2021. Amazon's annual revenue for 2021 rose by 21.7 per cent from 2020.
Netflix's annual revenue for 2022 grew by 6.46 per cent from 2021. Netflix's annual revenue for 2021 showed an 18.81 per cent increase from 2020.
Microsoft's annual revenue for 2023 rose by 6.88 per cent from 2022, while Amazon's revenue for the twelve months ending March 31, 2023, increased by 9.87 per cent.
doulotakter11@gmail.com