The National Board of Revenue (NBR) is probing for any foul play in receiving the sources of funds by registered trusts following global concerns about growing acts of money laundering.
A large part of the funding of trusts comes from religious sources which are exempt from income tax under the existing Income Tax Ordinance 1984.
As both local and international watchdogs raised questions over the funding, government's revenue department started checking the tax-compliance matters of the trusts.
From recently compiled data, the NBR found out a decline in submission of tax returns, volume of tax payments and aggregate disclosed incomes of trusts in the tax year 2015-16 compared to that of 2014-15.
Tax authority has found a total of 98 trusts having taxpayer identification number (TIN). Of them, some 70 submitted tax returns in the tax year 2014-15 but the number came down to 50 in 2015-16.
The tax-registered trusts paid Tk 170 million in income tax against their incomes in 2014-15 that dropped to Tk 131 million in 2015-16.
They paid the income tax against their disclosed incomes of Tk 647 million and Tk 409 million respectively in the two tax years.
The NBR collected the data from the field-level tax offices across the country ahead of a meeting recently held in the Bangladesh Financial Intelligence Unit (BFIU) of Bangladesh Bank (BB).
Talking to the FE, a senior income tax official said there is a concern of the Asia Pacific Group (APG) over money laundering by the trusts' funding sources.
"As per the Income Tax Ordinance, house-property income of a trust is tax-free if it is formed for charitable or religious purposes. Other incomes are taxable," he said.
However, the provision is not applicable for the non-governmental organizations (NGOs) that are registered with the NGO Affairs Bureau.
Individual tax rates and tax-free threshold are applicable for trusts that are registered under Trust Act 1882, he mentioned.
However, he said, beneficiaries of the trust are not exempted from payment of income tax.
As distribution of the funds of a trust is not tax-free, there is little scope to use the funds in terrorist financing. The anti-money laundering watchdog raised their concern as trust incomes are tax-free in other countries, he observed.
Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur said the sourcing of fund of trusts could be traced but heavy-handed steps could discourage genuine funding.
"The country needs philanthropy and uninterrupted flow of fund in the trusts," he added.
There are many trusts which are dependent on religious funding, he noted.
On decline in the number of tax returns and tax payments, he said many small-scale trusts faced closure for want of fund.
"Activities of small non-government organisations and trusts faced difficulties for fund crunch that may cause decline in their number of returns and income," he added.
Tax officials said concerns over terror financing were stoked up following recent attacks on Gulshan Holey Artisan Bakery and Solakia eidgah. Law-enforcing agencies have intensified vigilance to trace sources of terrorist financing to check its inflow.
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