The taxmen are not accepting the financial statements of corporate taxpayers if those are not accompanied by the document verification codes (DVCs) given by the ICAB. A decision to this effect was enforced from yesterday (Tuesday).
The tax officials will have to examine the code in all the audited financial statements of corporate tax returns to check production of fake audit reports.
The deputy commissioner of taxes (DCT) concerned will have to verify the code by visiting the website (dvs.icab.org.bd) of the Institute of Chartered Accountants of Bangladesh (ICAB).
According to an instruction of the National Board of Revenue (NBR), which was issued on November 26, the taxmen will initiate punitive measures as per Section 35 of the Income Tax Ordinance 1984, if they find fake audit reports accompanying any income tax return.
"If the taxmen find that any audit report is not certified by chartered accountants after verifying the information on the ICAB website, or does not have signatures of the adequate number of the company directors, then the DCT will not accept it," the NBR mentioned.
In the NBR directive, the taxmen were asked to follow the said procedure from December 1 at the time of assessment of the audited financial statements, submitted with corporate returns.
The NBR sent the instruction to the field-level tax offices across the country.
At the time of assessment of corporate tax returns, the taxmen will have to register some information including name(s) of the auditor(s) who certified the financial statements, date of certification, the ICAB-generated DVC in the statements, and name of the signatory director in the audited statements.
"The instruction on verification of DVC will not be applicable for the audited financial statements, certified before December 1," the NBR said. The deadlines for submission of tax returns by corporate taxpayers are December 31 and June 30 every year, depending on their nature of business.
The ICAB launched the Document Verification System (DVS) to check fake audit reports that some corporate taxpayers submit without the certification of chartered accountants.
Talking to the FE on Tuesday, ICAB President Muhammad Farooq said the DVS will put an end to the existence of fake financial statements of corporate taxpayers in Bangladesh.
"Chartered accountants will have to log in to the DVS to generate a code, and this code will have to be furnished in the audited financial statements of a corporate taxpayer." The corporate taxpayers will not be able to submit fake audit reports, as the taxmen will not accept any report without the code.
It will ensure transparency and help the government increase corporate tax collection to a great extent, he added.
Currently, the ICAB has 2,053 members. Of them, some 350 are in practice, while others are employed either in corporate firms or elsewhere.
According to the NBR data, more than 50 per cent of the firms, which filed income tax returns, provided fake audited financial reports in last fiscal year (FY), 2019-20.
Members of the ICAB signed some 17,000 audit reports in FY 2020, whereas the number of returns was 35,000.
Currently, some 78,000 corporate taxpayers have Taxpayers Identification Number (TIN).
A taskforce of the NBR found that 1,76,000 companies are registered with the Registrar of Joint Stock Companies and Firms (RJSC).
As per the income tax ordinance, obtaining TIN and submission of return are mandatory for all the companies to run their activities.
According to the NBR study, more than 56 per cent of the firms do not have TIN, and also more than 55 per cent business entities having TINs do not pay income tax.
In August, the NBR's Central Intelligence Cell (CIC) formed a seven-member taskforce to bring all the registered public and private limited companies under tax net, find out fake TIN-holder companies, and track fake audit report of companies.
Officials said corporate tax compliance has been poor in the country for years due to lack of proper initiatives of the government.