National Board of Revenue has taken a move to scrutinise income tax files of taxpayers having tax exempted income or enjoying reduced tax rates to prevent misuse of the benefits.
Officials said that the move was taken to check the authenticity of income shown in the income tax returns by the taxpayers — individual and business entities.
NBR on December 20 formed a seven-member committee headed by its member (taxes appeal and exemption) Rawshon Ara Akter to examine the income shown in tax returns by the taxpayers who are enjoying tax exemption and reduced rates tax, they said.
There are allegations that many of the taxpayers show inflated income in their tax returns to create fake assets in their tax files, they said.
In many cases, the taxpayers also shift their income from other sectors where the tax rate is higher to the sectors having tax holiday or enjoying reduced tax rates to evade income tax, they added.
Many also legalise their illegal and untaxed money taking the benefits of tax exemption and reduced tax rates.
Sometimes, tax officials are found involved with the irregularities helping taxpayers to create fake assets in their tax returns through showing exaggerated income from the sectors.
NBR offers complete tax holiday to many sectors including industrial undertakings at special economic zones, least developed regions of the country and new industries, infrastructure projects like elevated expressway, flyover and power plants and other potential sectors to encourage both domestic and foreign investment in the sectors.
It also provides tax benefits at reduced rate for many sectors including information communication technology and IT-enabled services and IT park to help the sector flourish.
Some agricultural sectors like fisheries, poultry and dairy farming also enjoy reduced-rate tax benefits.
Officials said that it was found that many taxpayers were misusing the benefits through diversion of income or creating artificial income to and from the sectors for lessen tax burden and accumulating fake assets.
The amount of income from these sectors fluctuates based on the change of the rate of benefits to the sectors.
Officials also suspect that legalisation of untaxed money took place using the provisions.
It was found that many business entities had been very highly profitable during the tax exemption or reduced tax rate period but these became loss making entity once the benefits were expired, they said.
A senior NBR official last week told New Age that the team would scrutinise the allegations and submit a report to NBR with recommendations to check the misuse.
It will also recommend measures against tax officials involved in the unfair practice, he said.
He said that tax benefits for different sectors should be in place to encourage investment but there should also be mechanism to prevent the misuse.
Officials said that the team was now assessing the legal scope for getting access to returns of taxpayers.
It may involve the tax officials from the respective field offices in the investigation to avoid the legal complexities as tax law prevents disclosure of tax files to others, except some authorised tax officials, they said.
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