The Bangladesh government missed out on Tk 126.33 crore in FY20 due to 19 counts of irregularities found within the Large Taxpayers Unit (LTU-Tax wing), which works under the National Board of Revenue (NBR).
A latest compliance audit report by the office of Comptroller and Auditor General (CAG), which assessed work records and documents of LTU Dhaka and Chattogram offices, show that the losses account for 0.61 per cent of the total revenue collected by the LTU in FY20.
It adds that the LTU violated the Income Tax Ordinance 1984 rules and regulations, approved company expenditures higher than the legal limit, did not add such expenditures to the gross income of firms, and did not deduct the applicable amount of source tax.
The CAG report points out that the audit shed light on a number of financial irregularities and violations, which was caused by an ineffectual internal control system and non-compliance with regulations.
However, only Serious Financial Irregularities (SFI) has been included in the report.
The CAG, on multiple occasions, had requested the NBR chairman to respond to irregularities unearthed by the compliance audit report, but he is yet to provide any clarification on the matter.
What’re the irregularities?
According to the CAG report, the LTU – breaking regulations – gave approval to Export Import (Exim) Bank of Bangladesh Ltd’s excess expenditure, and did not add that figure to the company’s gross income in FY20. This caused the government to lose Tk 40.09 crore.
The bank disclosed a profit of Tk 417.74 crore before tax in its annual report. As per the income tax ordinance, the company is allowed to spend 10 per cent or Tk 41.77 crore in incentives and bonuses. But the company spent Tk 43.21 crore for that purpose.
In this case, the additional Tk 1.44 crore is deemed as income and applicable to the bank’s gross income.
Besides, Exim Bank spent Tk 4.22 crore in subscriptions and donations, which cannot be subtracted from the gross income. This is non-business operating expenditure, and this must be added to the gross income.
The bank provisioned Tk 101.24 crore for diminution in value of share and such expenditure cannot be subtracted as per the ordinance. It must be added to the gross income.
Against a gross income of Tk 23.21 crore, Green Delta Life Insurance Company Ltd paid Tk 7.28 crore in corporate taxes in FY20. However, the LTU was supposed to get an additional Tk 20.52 crore in taxes.
The firm spent Tk 54.73 crore to cover fire, marine, motor and miscellaneous insurance revenue accounts, along with agency commissions. But such expenditures are not deductible under the ordnance.
American Life Insurance Company spent Tk 41.17 crore on agent prizes and award expenses in FY20, which should have been added to the disclosed amount of gross income of Tk 615.15 crore. But the company did not add this figure.
This irregularity caused the government to lose out on Tk 16.46 crore in revenue that FY.
The government lost Tk 10.80 crore in tax revenue from the BRAC Bank Ltd, shows the CAG audit. The bank spent Tk 31.29 crore in salaries and allowance for outsourcing staff, but only submitted proof of paying source tax on only Tk 2.64 crore.
First Security Islami Bank Ltd spent Tk 21.50 crore on publicity & advertisement, printing & stationery, and business development & expenses. However, it did not submit any proof of deducting source tax on these expenditures.
So, the government missed out on Tk 8.06 crore in revenue from the bank in FY20.
In the case of Grameenphone Ltd, the LTU deducted less tax at source from the country’s largest telecom operator, compared to the amount applicable by ordinance. As a result, the government lost Tk 7.22 crore in revenue.
In FY20, Sanofi Bangladesh Ltd disclosed Tk 71.13 crore in its returns, and paid Tk 26.22 crore in taxes. The CAG report however mentions that the government missed out on Tk 57 lakh in taxes as an audit showed the firm’s income at Tk 72.74 crore.
Similarly, the government lost Tk 11.97 lakh in taxes from Navana Ltd due to less deduction of source tax and approving expenditure that was not applicable.
The state exchequer lost Tk 1.22 crore in taxes from BRAC EPL Stock Brokerage Ltd, Tk 2.01 crore from Al-Arafah Islami Bank Ltd, Tk 3.90 crore from New Zealand Dairy Products Bangladesh Ltd, Tk 2.37 crore from Union Bank Ltd, Tk 19.74 lakh from Sheikh Akij Uddin Limited, and Tk 57.65 lakh from Shimanto Bank Ltd.
Besides, the government lost Tk 40.49 lakh of The Trust Bank Ltd, Tk 6.68 crore of Mercantile Bank Ltd, Tk 58.61 lakh of IDLC Finance Ltd, Tk 97.02 lakh of Madina Cement Industries Ltd, Tk 3.54 crore of MM Ispahani Ltd.
Commenting on the issue, Director General of Directorate of Revenue Audit Md Bodiuzzaman, who signed the CAG audit report, said, “This report has been discussed in parliament. Losses suffered by the government due to irregularities within the LTU could be much larger.”
The Business Post tried to reach out to NBR Chairman Abu Hena Md Rahmatul Muneem for his comments on the matter, but he could not be reached on phone till the filing of this report.
