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Run-Up To Budget FY06

Tax evasion getting tough

Beefed up monitoring, quarterly targets, punitive measures on the cards

Rejaul Karim Byron
The government is stepping up tax evasion curbing measures to boost revenue collection, so as to feed the bigger than usual budget it plans for the next fiscal year.
According sources at the National Board of Revenue (NBR), the government may have its eye on a revenue to the tune of Tk 47,000 crore in FY 2005-06, which is 8.82 percent higher than the current fiscal year's Tk 43,189 crore revenue target.
To make tax evasion really tough, the government is now putting more muscle into the NBR Central Intelligence Cell (CIC). It will also increase the number of special audits and arrange for punishment of the taxpayers who fail to submit their lifestyle information along with the tax returns.
Besides, to discourage taxpayers from abusing the appeal and tribunal system, from next year they will be required to pay in advance 50 percent, instead of the current 15 percent, of the difference between the contested and the admitted amount.
PUTTING TEETH INTO NBR CIC
Of the probable Tk 47,000 crore overall revenue target for FY06, the NBR might be assigned to collect Tk 35,600 crore, sources said.
In order to realise the task the NBR in FY06 will be assigned with quarterly revenue collection targets. The target for the first quarter will most likely be Tk 7,300 crore, second Tk 15,400 crore, third Tk 24,400 crore and last Tk 35,600 crore.
The government has already conveyed this quarterly plan to the International Monetary Fund and to make this happen, it puts special emphasis on the CIC.
Formed last year, the cell so far has kept its focus and activities limited to Dhaka. But in FY06, it will have an office in Chittagong too. Its staff strength will also be doubled from the current 27 to 54 and the NBR will be allowed to recruit investigators directly for the cell.
The CIC will also be equipped with a range of sophisticated intelligence and monitoring gadgets including special software. Its officials will get training abroad, in countries that have excellent track of detecting and reining in tax evasion. The government has sought the donors' assistance in this regard.
"Since its inception to date, the CIC has unearthed 10 cases of tax evasion by individual taxpayers. They dodged Tk 10 crore to Tk 40 crore each," said an NBR source without naming the tax-dodgers.
The cell's monitoring also helped increase tax collection drastically from clearing and forwarding (C&F) agents.
"There are around 2,500 C&F agents in the country. It may sound unbelievable, but their combined tax payment had been less than Tk 1 crore a year before the CIC was introduced," says a CIC official.
"After we started compiling their data in our computers, they started paying bigger tax. Would you believe, now they are paying more than Tk 2 crore a month? We expect to gather Tk 40 crore tax from the C&F agents in the current fiscal year," he added.
Under the new drive to make tax evasion difficult, the NBR started monitoring and investigating the leading physicians in the capital in FY05, resulting in a dramatic rise in tax collection from doctors. "A doctor, who showed Tk 5 lakh income in the previous fiscal year, has been forced this year to state his true annual income -- around Tk 80 lakh," the CIC official told The Daily Star yesterday.
He said, "Next year we shall bring other professionals like chartered accountants or lawyers under this monitoring and investigation system."
PEPPED UP LTU
Both the Large Taxpayers Units (LTUs) of the Income Tax Department and the Vat (value-added tax) Department will also be invigorated.
The Income Tax LTU currently has 1,005 files and the Vat LTU 160 files on 'perceivably' large taxpayers. The government now considers defining a turnover threshold to place the taxpayers having more than that under the LTUs. However the threshold figure has not been determined yet.
Next year, the LTUs will conduct more joint audits than they presently do. In the current fiscal year, they conducted three joint audits and detected a Tk 3 crore tax evasion by a mineral water company.
The NBR will also form an independent audit unit headed by an adviser, with the rank and status of a board member, reporting directly to the chairman.
The country presently has around 15 lakh enlisted taxpayers, although only one third of them actually pay up. The NBR expects to raise the total number of taxpayers on the list to 17 lakh and that of real taxpayers to around 7 lakh in FY06.