Tax officials have detected abuse of the newly introduced 'universal self-assessment' by some of the large taxpayers, who have submitted tax returns showing virtually no taxable income this year. But the same assesses paid substantial amount of tax last year.
During the last few months, some tax commissionarates have made complaints to the revenue board on the basis of their findings that some of the big tax payers had concealed information about their actual income in the universal self-assessment returns.
The National Board of Revenue (NBR) has introduced the universal self-assessment in the current fiscal under which Tk 1.71 billion tax was collected from 0.23 million self-assessment returns.
At the time of introduction of the system, the NBR had promised that it will unconditionally accept whatever amount of tax is paid by the taxpayers under it.
Tax officials said a number of big taxpayers have submitted returns showing a significant decline in income compared to that of last year.
In the backdrop, The NBR early this month had issued a letter to all tax offices to provide a list of the suspected tax evaders.
But, the board had to suspend the order within a week following strong resistance from some of the taxpayers. They argued that the government should not verify the statements as it had earlier promised to accept all universal self-assesses statements without questions.
The NBR directed the tax commissioners to provide the list of suspected evaders by May 10 last, but it had to withdraw the decision following strong resistance from a section of tax payers.
Earlier on May 8, the NBR issued a letter suspending the previous order for random auditing the universal self-assessment files.
Income tax officials said: "In the income tax ordinance 82bb(3), there is a provision to audit selective returns filed under universal self-assessment system."
"Although the government has introduced the measure to encourage voluntary filing of actual tax returns, audit is necessary as a control mechanism of the government to thwart concealment of actual income by abusing the facility," senior official of tax department.
Talking to the FE, the NBR chairman Mohammad Abdul Mazid said: "The government will keep its earlier promise and show due respect to the universal self-assesses."
Tax offices could audit only 10 per cent tax files at random, not all tax files, of such tax returns after obtaining approval of the board.
Asked about the withdrawal of the order suspending verification of tax files, the NBR chief said: "The order has been kept in abeyance in view of possible misunderstanding among the taxpayers on this issue."
Only selected tax files, which the taxmen are confirmed about tax evasion, would be scrutinised with the permission of NBR, he added.
Talking to FE, tax ombudsman Khairuzzaman Chowdhury said: "There must be an option to audit universal self assessment on some specific cases."
Otherwise, the tax dodgers will be encouraged to evade tax concealing actual information and the government will be deprived of its due revenue earnings, Chowdhury said.
"Simultaneously, it should be noticed that taxpayers are not harassed indiscriminately," he said.
The tax offices should obtain final approval from the higher authority of revenue board to audit any self-assessment file, he added.
According to NBR figures on submission of individual tax returns, a total of 0.64 million taxpayers paid Tk 7.39 billion tax in 2007-08 tax year. Of the amount, returns worth Tk 3.74 billion were given by general taxpayers while self-assessment taxpayers filed Tk 1.92 billion and universal self-assessment taxpayers paid Tk 1.71 billion.
The NBR specified seven criteria to audit universal self-assessment files of individual taxpayers. Those includes showing illogical losses in business despite having record income previously, abnormal decline in income compared to previous year, no logical explanation of increased wealth, unacceptable tax exempted income, unacceptable donation, non-institutional loan taking without evidence and loopholes in law.
In case of company tax payers, abnormal expenditure in specific sector, showing illogical loss or refund will be the criteria in addition to those set for individual taxpayers.
According to the rule, the NBR will have the authority to give approval for auditing the universal tax return files.
Asked about the issue, a senior official of NBR said: "We have only suspended, not stopped, the move on auditing the universal self-assessment files. The board will issue a fresh order modifying some criteria that created resentment among the taxpayers."
As it is a new measure to encourage voluntary submission of tax returns, the government must relax some of the rules on auditing for the first two or three years, he said.
