The National Board of Revenue (NBR) has tightened the rules on accounting standards for companies in an attempt to check the widespread accounting manipulation by a large number of local firms to evade taxes.
The move also comes to counter the effects of the cuts in corporate tax for non-listed companies from 37.5 percent to 35 percent and turnover tax on companies from 0.5 percent to 0.3 percent on the national coffer.
From July 1, companies will have to prepare their annual financial statements by following Bangladesh Accounting Standard (BAS) and Bangladesh Financial Reporting Standard (BFRS).
Partnership or proprietorship firms with income exceeding Tk 5 crore a year too will have to get their accounts or balance sheets certified by chartered accountants or cost and management accountants from fiscal 2014-15.
Additionally, in a bid to discourage chartered accountants from providing false audit reports, the NBR has introduced penalty between Tk 50,000 and Tk 2 lakh, according to the Finance Bill 2014.
AF Nesaruddin, council member of the Institute of Chartered Accountants of Bangladesh, welcomed the measures. “We want implementation and compliance of BAS and BFRS everywhere.” But inclusion of cost and management accountants in auditing is not the right step because auditing is not their job, added Nesaruddin, also partner of Hoda Vasi Chowdhury and Company.
Subhash Chandra Das, a charted accountant at a state-run bank, said the tightened accounting standards are a step in the right direction and will ensure true and fair financial reporting.
Subsequently, the NBR officials are expecting an additional Tk 500 crore in tax in fiscal 2014-15.
The revenue impact will be higher in the long run if transparency can be ensured, said a senior NBR official seeking to remain unnamed as he is not authorised to speak to the media.
Currently, only banks, insurance, financial institutions, listed companies, multinational companies and some large local corporates follow the accounting standards, said Das, also a cost and management accountant.
The institutions also account for half of the direct tax collected by the revenue authority, according to taxmen.
Of the 119,096 companies listed with the Registrar of Joint Stock Companies and Firms, 65,000 have taxpayer identification numbers, according to data from the NBR. The rest do not have TINs, meaning they do not comply with the rules for submitting annual tax returns.