The Value Added Tax (VAT) authority is going to get access to the DVS-verified audited financial reports of corporate taxpayers in a bid to check evasion.
Duplication of financial reports to conceal actual collection of consumers' tax would be checked after the VAT authority gets access to the Document Verification System (DVS).
The National Board of Revenue (NBR) signed a Memorandum of Understanding (MoU) with the Institute of Chartered Accountants of Bangladesh (ICAB) on Tuesday to get the access.
NBR Member (VAT policy) Masud Sadiq and ICAB President Mahmudul Hassan Khusru signed the MoU on behalf of their respective organisations.
A group of VAT officials would get user ID and password of the ICAB to crosscheck information of VAT returns with the audited financial report of a company.
Mohammed Forkan Uddin, council member and convener of the ICAB, said the association is likely to be able to give access to the VAT officials by November.
He also said all 380 chartered accountants (CAs) under the ICAB have obtained DVS ID and password for ensuring compliances.
Earlier, the NBR and the ICAB introduced DVS on December 1, 2020 to facilitate income tax officials to crosscheck income tax-related information of corporate taxpayers.
"We have not yet received any complaints from the tax authority that any member of the ICAB prepared financial report bypassing DVS."
DVS would help to check multiple financial reports by taxpayers to evade taxes, he added.
The ICAB would take stern actions, if it finds, through investigating allegations, anyone not complying with the mandatory provision of DVS.
Mr Forkan Uddin further said the password and user ID - delivered to the income tax authority - are not accessible by the VAT officials.
Signing separate MoU is required to facilitate the VAT officials with user ID and password, he added.
A senior VAT official said the new provision on submission of audited financial reports of corporate taxpayers to the VAT authority would help to check VAT evasion, if it is verified by DVS.
He noted that the businesses would not be able to conceal financial transactions by preparing two reports - one for bank loan and other for the VAT authority.
Using DVS was made mandatory for all CAs - from December 1, 2020 and onwards - who would have to generate document verification code (DVC).
DVC is a system-generated alphanumeric unique ID for audit reports. During generating DVC, some mandatory financial figures of the company concerned, like - turnover, net worth, and profit or loss etc, must be entered.
Unscrupulous business organisations that use doctored reports to evade VAT and income tax would not be able to continue the unethical practice, VAT officials said.
The ICAB members also alleged that financial reports of corporate taxpayers were sometimes endorsed by third persons - misrepresenting themselves as CA.
Such unethical practice tarnished their image and gave a wrong impression to the regulatory authorities and stakeholders.
The ICAB members said DVS was developed by ensuring data security and confidentiality of clients.
Audit reports and financial statements signed by them would not be accepted by the taxmen, if these are not verified by DVS, income tax officials said.
As per the Companies Act 1994, all the companies - registered with the Registrar of Joint Stock Companies and Firms (RJSC) - must be audited by CA firms.
As per the Income Tax Ordinance 1984, all the corporate taxpayers must submit financial report - audited by CA - with their annual tax return.
According to the VAT and Supplementary Duty Act 2012, businesses have to submit CA-audited financial report of a financial year - within six months to one year of the next year - to the VAT authority.
Jasim Uddin, a tax consultant and fellow member of the ICAB, said some 1,75,000 companies are registered with the RJSC, but only 17,000 of them have CA-audited financial reports.
It has been alleged that some companies use the names of reputed CA firms without their consent.
DVS would help to check this unethical practice, but the regulatory authorities would have to monitor the non-compliance actively to make this system successful with joint efforts, he added.
In July, the Bangladesh Bank (BB) issued a circular, instructing all the scheduled banks to verify their borrowers' submitted financial statements by using DVS, for ensuring authenticity of information.
It asked all the managing directors and chief executive officers to contact the ICAB for using DVS.
The BB circular also said it took the measure for reducing the amount of non-performing loans (NPLs) along with ensuring credit discipline in the country's banking system.
The ICAB also joined hands with the Bangladesh Securities and Exchange Commission (BSEC) and the Financial Reporting Council (FRC) to use DVS.
However, the Insurance Development and Regulatory Authority (IDRA) is yet to respond to the ICAB's proposal to ensure transparent credit discipline in insurance companies.
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