Govt deprived of tax on capital gains: ICAB

The government is being deprived of tax on capital gains because of transfer of shares of local companies at face value, although net value per share remains higher than the book value, said the ICAB yesterday.

The tax authority could consider the actual value of a company while approving share transfers based on valuation reports on the firm, proposed the Institute of Chartered Accountants of Bangladesh (ICAB).

"The government will get a large amount of tax if it introduces the provision," said ICAB President Mahmudul Hasan Khusru.

He was placing the ICAB's recommendations on tax measures for fiscal 2021-22 for the high-ups of the National Board of Revenue (NBR).

The national professional accounting body also proposed harsher punishments for companies hiring foreigners without first availing permission of the appropriate authorities.

The ICAB said a large number of foreigners work illegally at various industries and businesses and the government was not getting any tax although the salaries were being paid in foreign currencies.

So foreign currencies are in a way being siphoned off illegally, said the ICAB at a discussion at the NBR.

The tax authority organised the event to hear views and issues of businesses, professional bodies and other stakeholders before framing tax proposals for the next fiscal year.

The ICAB also recommended imposing a 2 per cent tax on gross receipts of technological companies which provide digital services, such as advertisements.

At present, a 15 per cent tax at source is payable on digital services.

"The rate is very high and not realistic," saidKhusru.

The accounting body's proposal reflects the expansion of the digital economy, buoyed by increasing participation of people in online marketplaces.

To reach consumers, companies are also focusing on using digital platforms for advertisement and campaigns.

The ICAB said prospects of collecting a higher amount of tax from the digital economy was increasing.

In some specific areas, a Digital Services Tax (DST) has been expanded. The DST will be instrumental in higher revenue collection and in helping the domestic businesses operate, said the ICAB.

Local companies that provide digital ads to platforms of Facebook and Google have to pay a 15 per cent source tax apart from a 15 per cent value added tax (VAT), said Snehasish Barua, convener of taxation and corporate laws committee of the ICAB.

"It means we are not getting taxes from these digital service companies," he said, adding that because of that high rate of taxes, many people do not buy the services directly from Bangladesh, lead to a loss of revenue for the state.

As per a VAT law, he said, these non-resident digital companies would have to appoint VAT agents in Bangladesh. Hence, if the NBR imposes an income tax of 2 to 3 per cent on receipts, information will be readily available from them, he said.

The ICAB also sought a 2.5 per cent reduction in corporate tax for listed and non-listed companies.