ICAB backs amnesty for companies to whiten black money

The Institute of Chartered Accountants of Bangladesh (ICAB) yesterday expressed support for the government's move to allow companies to whiten money without facing scrutiny by paying a 15 percent tax.

"The amnesty to whiten black money by paying a 15 percent tax is logical for companies as they could not show their legal income before 2021 due to the introduction of the document verification system (DVS)," said Mohammed Humayun Kabir, council member of ICAB.

He made the comments at a post-budget media briefing at the ICAB office in Dhaka.

However, he did not remark about the same amnesty for individual taxpayers.

According to the former ICAB president, companies used to prepare three separate financial statements -- one for the National Board of Revenue and another for banks while keeping the original for their own use -- before the introduction of the DVS, which is an electronic method of validating the authenticity of audit reports.

Because of such practices, they could not show their actual incomes after the DVS was launched. Because tax authorities, banks and other regulatory bodies can check the authenticity of the accounts.

About the overall budgetary measures, the ICAB said the proposal to finance the budget deficit by borrowing from internal sources may lead to inflation in the next fiscal year.

The government plans to finance the deficit by borrowing Tk 160,900 crore, or about 20 percent of the total outlay, from local sources.

"The country's inflation rate is currently over 9 percent, which is indicative of hyperinflation. And local borrowing may fuel inflation," said Mohammad Forkan Uddin, president of ICAB.

He added that they appreciated several practical initiatives, including introducing tax rates that are applicable for two years, reducing tax rates for private companies and one-person companies, and reducing the withholding tax on consumer goods.

The ICAB also lauded changes in the VAT and supplementary duties act, such as allowing the payment of 10 percent instead of 20 percent of the demand without penalty while appealing to the customs, VAT appeal commissionerates and appellate tribunal.

The ICAB also praised the government initiative to set up Electronic Fiscal Device Management Systems (EFDMS) in a bid to expand the VAT net.

It further said the government took the challenge of implementing a development budget of Tk 265,000 crore despite global economic uncertainties, which is a very encouraging step.

Besides, the ICAB welcomed the enactment of the new Customs Act 2023 and its implementation from June 6, 2024, which introduced provisions for self-assessment, reduced initial duty or tax from 50 percent to 10 percent in case of appeals against claimed duty and tax or penalty, and extended the period for claiming refunds from six months to three years.

Shubashish Bose, chief executive officer of ICAB, said the proposed budget was tightened because of external factors.

He said the target to increase private sector investment by 29 percent would be very difficult to achieve because of the liquidity crunch in the banking sector.

Snehasish Barua, managing director of SMAC Advisory Services, said the income tax burden is increasing day by day as the government has been reducing indirect tax.

Regarding the tax-free income limit and tax tiers, he said lower middle-income people would suffer due to inflationary pressures as the tax-free limit remained the same, which means higher and middle-income groups would be comfortable.