The Document Verification System (DVS) software, developed jointly by the National Board of Revenue (NBR) and the Institute of Chartered Accountants of Bangladesh (ICAB), is expected to be a handy tool for the taxmen trying to stop tax evasion by companies submitting fake financials. The software, however, would offer benefit only if its developers are truly serious about getting results out of it.
The development of the software represents a unique private-public partnership. The software would prove useful if the audit firms and the taxmen ensure its proper use. The chartered accountants would need to upload the financials to the DVS faithfully and the taxmen match the returns with the DVS inputs. All these would happen only if the audit firms and tax officials prove to be true to their designated tasks. Here, both NBR and ICAB will have to be watchful.
That the country's tax- GDP (gross domestic product) ratio is one of the lowest in the region is a widely known fact. The evasion of tax payment by eligible companies is one of the major reasons behind the poor revenue receipt. Numbers do speak for the situation on the ground. Nearly 176, 000 companies are registered with the Registrar of Joint Stock Companies and Firms (RJSC&F) and around 78000 of them have tax identification numbers (TINs). Sadly enough, half of them do not submit tax returns at the end of the every assessment year. Then again, financials accompanying the returns of a sizeable number of companies are suspected to be doctored ones.
Thus, the DVS software could be a breakthrough in the NBR's efforts to boost corporate tax revenue when all the relevant works are done faithfully by all the relevant parties. The quality of audit reports to be uploaded to the software will of be of great import. The professional integrity of chartered accountants who are promise-bound to follow international and national auditing standards comes into play here.
Unfortunately, allegations about deviation from such standards by a section of unscrupulous auditors have surfaced in recent years. In the face of demands from capital market investors and experts, the government has put in place the Financial Reporting Council (FRC) to discipline the audit work. But the council is taking time to show its teeth, it seems.
Another important issue--- non-submission of tax returns by a large number of companies--- should not escape the notice of the revenue authorities. Had these entities submitted their authentic tax returns, the volume of tax receipts would have gone up manifold. That would have helped the government address one of the major fiscal weaknesses---deficit financing--- to a great extent.
Besides, it could have also helped the government to meet a long-standing demand from the private sector---lowering of the corporate tax rates. The demand is justified since the corporate tax rate in Bangladesh, compared to many other countries, is high. But the cut will be possible only if the companies turn out to be faithful in preparing genuine financials and paying taxes to the government.
