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Proposed budget needs further review

AF NESARUDDIN
THE budget and Finance Bill 2014 placed recently by the finance minister is now the main subject of discussion for all the stakeholders, especially the taxpayers all over the country'. No doubt, certain proposals are realistic in the context of Bangladesh and these are: a) Increasing the individual tax threshold for women, the physically and mentally-challenged and wounded freedom fighters.
b) The maximum tax rate increased to 30 percent for individuals with income exceeding Tk 44.2 lakh.
c) Introducing four levels of rates in wealth surcharge.
d) Resetting turnover tax at 0.30 percent.
e) Introduction of compliance of Bangladesh Accounting Standard and Bangladesh Financial Reporting Standard.
f) Collection of rent through bank accounts and similarly, payment of rents through banks.
g) Extending the time limit for tax holiday for certain industries to September 30, 2019.
h) Introduction of tax on capital gains exceeding Tk 10 lakh from transfer of shares by an individual.
i) Increasing and re-fixing withholding tax on transfer of immovable properties.
j) Raising the limit of allowable perquisites to Tk 350,000.
k) Expanding the area of tax withholding.
I) Reintroducing exclusion of assessee from audit having income over 20 percent than last year.
m) Imposing penalty for false certification of financial statements, and making the Transfer Pricing Cell of NBR functional from July.
These steps are not enough, but encouraging for the simplification of tax systems, increasing revenue, equity concept and business-friendly environment.
On the other hand, certification of financial statements and specifically turn- over of assessee not being a company is a good step but inclusion of cost and management accountants for conducting audit and certifying financial statements is a wrong step.
The Institute of Chartered Accountants of Bangladesh (ICAB) was established in 1973 through a presidential order to regulate accounting and audit profession in the country while The Institute of Cost and Management Accountants of Bangladesh (ICMAB) was established in 1977 to regulate cost and management accountants.
It is very important that objectives of ICMAB Ordinance do not include any audit function. In addition, syllabus and course curriculum and most importantly, mandatory practical training of three years and many other areas are completely different in the two institutes.
It is well recognised that three years of practical auditing experience is a unique feature of CA profession as recognised worldwide. Cost accountants are allowed
to do the cost audit but it should be kept in mind that cost audit and certifying financial statements are not the same.
A vested quarter is trying hard for introducing cost and management accountants in audit functions unlike any other country in the world.
However, area of certification by chartered accountants can be expanded to withholding tax, foreign and extraordinary payments, transactions among directors and group entities. The issue must be reviewed dispassionately.
Any false certification of financial statements or any other document calls for a penalty. A new clause has been introduced to impose penalty for chartered accountants certifying false statements.
The preparation of financial statements is the main responsibility of management of the entity or the assessee. Similar penalty should also be imposed on the management of the entity or assessee apart from imposing due tax.
Tax on insurance money: A new clause has been inserted imposing withholding tax at 5 percent on the amount paid for life insurance policy in excess of accumulated premium paid. It is a discouraging step towards savings and investment by middle-and limited-income groups.
In our country, no pension and health insurance benefits are sponsored by the state for private sector employees. Further, people have an apathy to life insurance and current coverage of people by life insurance is lower than expected.
In such a situation, such a measure will obviously discourage small savers and investors for life insurance policy and life insurance companies are expected to be affected severely.
No steps appear to have been taken to reduce the discretionary powers of assessing officers and as a result, corruption by assessing officers and hassle for the taxpayers will remain.
FROM PAGE B4
Very often, the assessing officers reject the audited accounts under some pretext or other without any justification and determine taxable income at an arbitrary and excessive figure.
Selection of files for audit is not a methodical or scientific process and as a result, assessing officers pick up the files at their choice leaving scope for corruption and harassment of targeted persons.
Bank accounts are very often attached without completing the due process and proving the assessee in default as stipulated in tax laws.
Similarly, very often files are reopened at the choice of the assessing officers without applying due process of selection. This should not be allowed to continue.
Any actions taken by the assessing officers must be supported by clear-cut evidence, strong justification and reasons.
The appointment of a judicial member in each bench of the tribunal has not been
considered. It is a longstandingdemand of the taxpayers and consultants for more judicious and transparent practices.
Tribunal members are appointed mostly from the commissioner of taxes, raising the question of their independence. In such a situation, a fair judgment can hardly be expected.
Further, the tribunal being the highest authority and a quasi-judicial body in the tax department, the matters raised to them should be of legal nature than the fact finding ones.
But unfortunately, many decisions issued by tribunal are almost similar in nature and basically in line with decisions given by the tax authority.
In essence, to ensure its neutrality and fairness, the tribunal should include one independent person from outside the tax department and especially a judicial member having legal expertise.
The writer is a chartered accountant and partner