To relieve taxpayers of hassles, NBR plans to cut field officials' power

The National Board of Revenue (NBR) is planning to significantly curtail the power of field-level tax officials to assess return files to relieve taxpayers from hassle, and encourage them to file income tax returns through self-assessment, according to sources within the NBR.

If the plan is incorporated in the upcoming finance act, tax officials will no longer have the authority to assess any tax files.

Additionally, the NBR is considering eliminating the need for tax officials' signatures to obtain an income tax certificate, a practice currently followed at the field level in case of filing returns manually.

There are common allegations that this process is time-consuming and, in some cases, involves harassment and under-the-table payments.

"We are working on a provision to incorporate in the upcoming finance act that there will be no legal provision of return assessment power to the field-level tax officials. All tax files will be submitted through the self-assessment system, and if any issues are found, the file will go through the audit process," an NBR official, closely involved with preparing fiscal policy, told The Business Standard on condition of anonymity.

He further said, "We are working to finalise an income tax audit manual simultaneously, which will provide a software-based guideline on which files should undergo audit. This will eliminate discretionary power for officials to choose files for audit on their own."

Currently, about 50% of companies' tax returns are filed through tax officials, while almost 100% of returns are filed through the self-assessment system for individuals, according to NBR sources.

In Bangladesh, the number of Tax Identification Number (TIN) holders now exceeds one crore, with 37 lakh submitting returns.

Apurbo Kanti Das, former NBR member of income tax policy, told TBS, "If this happens in the next budget, it will be a good move to ensure compliance as well as confidence among taxpayers, especially companies.

"Taxpayers can declare their income, expenditure, and pay applicable taxes. So there will be no argument from that side that tax officials increase their taxes or hassle them," he said, adding, "if any anomalies are found in the tax file, it will then go through the audit process.

"After proving any tax concealment, the assessee will have to pay the amount through a legal process, which will be a win-win situation for both the government and the taxpayer." 

Dr Muhammad Abdul Mazid, former NBR chairman, told TBS, "It's a good move if the NBR truly wants to relieve taxpayers from hassle in the name of file assessment by tax officials." 

"But we have to wait until the budget proposal to see if these changes actually come," he added.

However, he expressed doubt whether the NBR will ultimately be able to implement it, saying, "I am not sure whether this objective will be achieved, as field-level officers may object to it."

Why companies choose to submit return through tax officials

Currently, there are about three lakh registered companies in the country, of which 50,000 submit tax returns yearly. Out of them, about 50% of the companies submit returns through tax officials.

A tax expert told TBS on condition of anonymity, "If submitted through assessment by officials, some taxes may increase, and there may also be additional expenses incurred. But if any company submits files through the self-assessment system, there is a possibility of the file being selected for audit, which may involve significant financial and time commitments."

"For this reason, big companies choose assessment through officials to avoid further hassle and harassment by audits," he added.

He also said that in the case of minor flaws or anomalies, companies can resolve them through "negotiation" with the officials.

Another tax lawyer said, "In the case of sourcing from local suppliers, it is quite hard for a company to obtain proper documentation of tax deduction at source (TDS) in some cases, which is currently 2%. However, under the provisions of the existing tax law, without proper documentation, that sourcing cost would be disallowed, and the company would have to pay a straight 30% tax on it."

"If any file selected for audit involves such issues, it could put the company in a difficult situation. For this reason, companies opt for the alternative option," he added.

Apurbo Kanti Das, former NBR member of income tax policy, said, "Less than 2% of returns submitted through the self-assessment process are selected for audit. Therefore, the fear is not logical."