Evil nexus stops cos going public, says SEC chief
Wednesday, 6 June 2007
Collusion between taxpayers, collectors and auditors prevents non-listed companies from going public although they face higher taxes, Securities and Exchange Commission (SEC) chairman Faruq Ahmad Siddiqi said Tuesday, reports bdnews24.com.
"I think fiscal benefits are market-friendly. But no policies will encourage companies to go public when they have the chance to avoid taxes by manipulating accounts with the help of auditors," the SEC chairman said.
Siddiqi, a former secretary of the Commerce Ministry and member of the tax policy unit at the National Board of Revenue (NBR), made the observations in an exclusive interview with the news agency in his office.
Siddiqi referred to the existing 10 per cent gap in taxes between listed and non-listed companies, and said the imposition of higher tax on non-listed companies did not bring any company to the capital market.
"Only the companies that face regulatory bindings go public," he said.
The corporate tax on listed and non-listed companies currently stands at 30 per cent and 40 per cent respectively.
Allegations have it that non-listed companies tamper with account details to pay less than 40 per cent tax.
The SEC chairman said, "We depend on the reports of auditors to judge a company's financial status. But it becomes difficult for us to proceed when auditors help manipulate account details."
"It looks like a collusion where the interests of taxpayers and tax collectors coincide."
However, he added that the formation of a financial reporting council (FRC) would help oversee auditors' functions. The FRC is expected to come into being after the passing of an ordinance.
"I strongly believe the FRC will help bring accountability among auditors and help reduce the tampering of accounts. This will bring about an increase in tax revenue and reap benefits for the capital market," Siddiqi said.
He suggested that the tax ombudsman be further empowered to cut corruption. Siddiqi also stated that low pay, inefficiency, corruption and authoritarianism of tax officials further impede tax collections.