NBR plans to go tough on audit firms to prevent fraud in financial reports

The National Board of Revenue (NBR) plans to enforce tougher accountability of audit firms to curb fraud in financial reports of businesses, and provisions for this will be included in the upcoming budget's finance act, said the organisation's Chairman Abdur Rahman Khan.

Addressing a pre-budget discussion at the NBR office in Agargaon today (4 March), he pointed out that while many businesses are generating significant profits, they are paying relatively low taxes, with false information being deliberately provided in financial reports for land and flat transactions.

Leaders of the Metropolitan Chamber of Commerce & Industry (MCCI) and the Foreign Investors' Chamber of Commerce & Industry (FICCI) attended the meeting, where they called for the removal of inconsistencies in tax laws.

Audit firms are tasked with reviewing and examining the financial statements of businesses. However, the issue of companies submitting false information in financial reports to evade taxes is longstanding. 

To address this, the NBR introduced the Document Verification System (DVS) a few years ago to verify audit reports, yet concerns over falsified reports remain.

NBR Chairman Abdur Rahman said, "Businessmen often do not report all transaction details, and this is widely known. CA firms certify a company's information as true and fair, but they clearly know that not all transaction details have been disclosed."

"We will now take measures to ensure that no transaction goes unreported. Audit firms cannot make reports based solely on the information provided by businesses. Both buyers and sellers often falsify details when registering land, which is a criminal offense," he said.

The NBR chairman said, "Many customs-related complications remain unresolved because traders continually import goods with false declarations. When customs officials notice that such goods are consistently being imported with incorrect information, they begin to suspect all traders. To avoid this, let us be honest, fair, and compliant. If we do this, the problems will disappear."

Abdur Rahman Khan said tax officials will also be monitored to ensure they are not favouring any tax evaders. "We are assessing the performance of tax officers to make sure they do not allow anyone to evade taxes or arbitrarily impose excessive taxes on someone. Our goal is to ensure that taxes are collected according to the law," the NBR chairman added.

Businesses highlight flaws in NBR laws

During the discussion, business leaders pointed out several flaws in the various laws of the National Board of Revenue (NBR). They explained that the lack of benefits from reduced corporate taxes is mainly due to several factors, including high withholding tax rates and the imposition of expense limits for companies.

Despite a reduction in corporate tax rates over the past few fiscal years, business leaders, including representatives from FICCI and MCCI, argued that the condition requiring cash transactions is hindering the full benefits of these cuts. 

MCCI President Kamran Tanvirur Rahman called for the removal of cash transaction requirements in corporate tax laws, stating, "Although the corporate tax rate and the effective tax rate have been reduced in recent years, no one is able to benefit from these reductions due to the cash transaction conditions in the Finance Act, 2024. Bangladesh's economy is 80% informal and not fully reliant on banking systems. As a result, large and medium companies face challenges complying with these requirements."

He also noted that the effective tax rate is excessively high, with deductions at the source and unauthorised expenses pushing it to as much as 40-50% in some cases.

FICCI President Zaved Akhtar led the delegation, while chartered accountant Snehasish Barua presented proposals on behalf of FICCI.

Snehasish Barua proposed removing the threshold for cash transactions, reforming the tax-at-source provisions, and phasing out the minimum tax.

"These steps will foster a more competitive tax environment, which, in turn, will encourage increased foreign direct investment inflows," he said.

Among the key proposals, the FICCI emphasised the importance of collaboration with the NBR to create a more integrated tax system that streamlines revenue collection processes.

FICCI also recommended the recognition and establishment of a clear distinction between policy formulation and revenue collection to encourage greater efficiency, transparency, and fairness in the tax system.