Bangladesh has more than 180,000 officially registered companies. Yet, roughly 35,000 of those businesses, that is just one-fifth of them, file income tax returns regularly -- a dismal picture even though rules make it compulsory for businesses to file returns annually.
Now, the National Board of Revenue (NBR) says it is going to identify the non-compliant companies, bring them under the tax net and take on fake audit filers.
To get the job done, it formed a seven-member team headed by a director of its Central Intelligence Cell (CIC) on 19 August.
The team will identify and prepare a list of the companies that do not have valid taxpayer identification numbers (TIN) and do not submit tax returns before preparing plans to bring all the companies under the tax net, as per an NBR notice.
"We want to go to the core of the problem," said a senior official of the NBR seeking to remain unnamed.
The initiative comes at a time when the coronavirus caused an economic crisis, putting a strain on revenue collection. NBR for the first time since independence reported a drop in overall revenue collection last fiscal year.
The collection of income tax, the second-biggest source of revenue after value-added tax (VAT), was marginally higher at Tk 73,000 crore, up 0.14 per cent from the previous year.
Of the collected revenue, companies account for more than 60 per cent of the tax and the rest comes from individual and other types of taxpayers, according to the NBR's annual report.
The tax official said companies are supposed to be under a higher regulatory environment.
However, the high proportion of non-compliance among the companies registered with the Office of the Registrar of Joint Stock Companies and Firms (RJSC) portrays a grim picture.
Questions also remain regarding audit reports, the official said, citing that members of the Institute of Chartered Accountants of Bangladesh (ICAB) can annually audit 17,000 firms.
"Who are conducting audits of the rest?" he asked, adding that nearly 35,000 tax returns were submitted by companies annually.
Some 80,000 companies have TINs, according to the NBR's annual report of fiscal 2017-18.
"We also see a mismatch in the reports submitted to banks by companies to get loans. There are reports that fake companies are getting loans. The non-compliant firms should be brought to the surface for ensuring discipline in the financial sector."
The revenue collection will not increase without ensuring compliance, he added.
The newly formed committee will devise strategies to prevent fake audit report submission, identify problems and suggest solutions to ensure that companies get TINs and submit returns and authentic audit reports.
The panel is also tasked to track the measures taken to curb anomalies and report to NBR.
"We will work with RJSC and ICAB to find out a system. There will be a big impact on revenue collection if we can curb the anomalies fully," the official said.
Until July, 3,500 public limited companies, 176,000 private limited companies and nearly 1,000 foreign companies were registered with the RJSC.
The total number of registered entities including firms and societies was more than 245,500 as of July, according to RJSC.