Twelve banks did not deduct VAT, tax and fees to the tune of Tk 315 crore between the years 2017 and 2021, applicable to outward remittance sent to non-resident companies and individuals for import of services.
Nine banks – not among the twelve mentioned above – have yet to respond to the Bangladesh Bank's letter regarding VAT and tax deduction, mentions a Bangladesh Bank letter sent recently to the National Board of Revenue (NBR), of which The Business Post has obtained a copy.
According to the letter, twelve banks did not comply with VAT and tax regulations under Section 119 of the Income Tax Act 2023 [56 section of the Income Tax Ordinance, 1984].
On different occasions, the Bangladesh Bank directed 21 banks to submit their audit report, and among them, nine are yet to make their submissions. This delay is preventing the central bank from calculating VAT and tax deductibles against outward remittance services by those banks.
The central bank found that twelve banks did not deduct over Tk 315.17 crore in VAT and taxes, including late payment charges, applicable on payments to non-resident services, the letter mentions.
These banks have not complied with regulations imposing tax, VAT, and late payment charges as deductibles. This figure is Tk 21.37 crore for City Bank, Tk 19.39 crore for HSBC, Tk 65.57 crore for Dhaka Bank, Tk 26.62 crore for Jamuna Bank, Tk 12,68 crore for Prime Bank, Tk 1.56 crore for State Bank of India (SBI), Tk 13.89 crore for Uttara Bank, and Tk 29.78 crore for Social Islami Bank (SIBL).
The figure is Tk 124.28 crore for four other banks.
In its letter, the central bank mentioned that SIBL’s audit firm Kazi Zahir Khan & Co Chartered Accountants did not conduct their audit as per regulations. This chartered company had not mentioned the tax deduction on its audit report on SIBL.
Besides, nine banks are yet to respond to central bank letters asking them for an audit report, and their delays persist. Among these banks are Sonali Bank, Pubali Bank, Mutual Trust Bank, Bank Asia, NRBC, Trust Bank, Shahjalal Islami Bank, and Al-Arafah Islami Bank.
On condition of anonymity, another senior NBR officer said, “The central bank has been working for many years on this particular issue, and we received their letter recently. We sent the letter to these banks last week.
“We are going to start a hearing this week with the banks. We are also seeking explanations from these banks.”
Nasiruddin Ahmed, former chairman of NBR, said “The board should take firm action against banks that did not deduct VAT and taxes as per regulations on non-resident services payment. If these deductibles are not ensured, the government may suffer a revenue shortfall.”
SMAC Advisory Services Ltd Director Snehasish Barua said, “Authorized Dealers (AD) carry out the transaction on behalf of their clients. Since the central bank issues circulars based on such tax regulations, banks [authorized dealers] are required to follow the regulator’s directives.
“As per the tax law, a non-deduction certificate is required from the International Tax Department of NBR if a foreign payment is exempt from tax deduction at source. Periodic monitoring by the central bank may unearth irregularities, if any, by these authorised dealers.”
Back in September 10 last year, The Business Post contacted City Bank Managing Director Mashrur Arefin, and asked him about the VAT and tax deductible issue on outward remittance. He however did not respond to queries.
The correspondent reached out to him on Saturday as well, but he could not be reached on phone.
The Business Post also tried to contact Dhaka Bank Assistant Vice President (Communications and Branding) Rayhan Kawsar for comments on the issue, but she did not respond till the filing of this report.
The situation was similar with managing directors of a few other banks.
