Revenue authorities, finally, have softened their stance on an ‘intrusive’ verification of financials of large taxpayers on an overriding question of privacy and business secrets of companies, sources say.
The business biggies may have to share the requisite data or 'auditing credentials (read only)' for auditing purpose with the value-added tax (VAT) authorities, giving a limited-scale access instead of 'Super password and user ID' as sought earlier.
After holding several meetings with the leaders of large corporate houses, who are members of the Metropolitan Chamber of Commerce and Industry (MCCI) and the Foreign Investors Chamber of Commerce and Industry (FICCI), the VAT authorities under Large Taxpayers Unit (LTU) of the National Board of Revenue (NBR) conceded to the moderation on a consensus decision.
A senior official concerned said the VAT authorities and the large taxpayers reached a consensus, in principle, on this new tax-file-verification method--meant by the revenue authority for averting any understatement and underpayment of taxes.
TIM NuruL Kabir, Executive Director of FICCI, said the chamber leaders agreed to extend cooperation in finding out a workable solution.
However, official sources said the process of giving access to the accounting software might take some time, say, about four to five months, as taxpayers will have to modify their accounting systems to make it accessible to the VAT sleuths.
The issue triggered concerns among the large corporate taxpayers after the LTU-VAT, on August 3, 2022, issued an order to all of its taxpayers for sharing their user ID and password in read-only form with the VAT officials for auditing purposes. Only seven days were given to corporates to comply with.
Preferring anonymity, a number of taxpayers said they were not feeling comfortable to share password and user ID in consideration of privacy issues and business secrecy on the competitive market.
Earlier, the MCCI-FICCI duo sent letters urging the LTU to reconsider its order.
Following their proposals, the LTU VAT wing held its first meeting with the chamber of foreign investors on August 30, 2022 and a second one last week.
"We have agreed to relax the order as the VAT official would need only data for auditing purposes to cross-check VAT payments by the companies," says Wahida Rahman Chowdhury, Commissioner of the LTU-VAT.
The LTU also held meeting with MCCI leaders on August 23, 2022, in the process finding an acceptable pathway.
Industry-insiders said multinational companies use customized software as prescribed by its parent companies. As such, MNCs feared several "risk-factors, including cyber-attack, data privacy, disclosure of price- sensitive information of manufacturing companies and negative impact on foreign direct investment (FDI)", they said.
"The LTU took the proposals of the FICCI seriously as some 23 taxpayers under LTU, out of 111, are members of FICCI," one official said about the bending of the binding rule.
FICCI members raised few points in the meeting, including legal basis of such order in the VAT and Supplementary Duty Act 2012, preparedness the NBR to access the VAT- accounting system of MNCs, technical upgradation of LTU for ensuring data protection of large taxpayers' information and so.
For sharing the auditing credentials in read-only format, the MNCs will have to obtain permission from their parent companies by giving satisfactory explanation.
