Sluggish business impacts corporate tax collection

Doulot Akter Mala

Corporate tax collection might face a blow in the current fiscal as taxmen predict a poor growth in businesses of the large companies including private commercial banks and mobile phone operators.

Income tax officials said achieving the target for the current fiscal would be a big challenge as it is quite ambitious considering the sluggish performance of the economy and poor investment.

In a recent letter, the large taxpayers unit (LTU) requested the National Board of Revenue (NBR) to revise its target for corporate tax collection for the fiscal year (FY) 2012-13.

The government has set the target of tax collection at Tk 123.50 billion for the LTU. Banks, financial institutions and cell phone companies are the main areas of business that come within the operational domain of the unit for the purpose of tax collection.

According to the official figure, the LTU missed its target of revenue collection in the first half of the current fiscal. It collected Tk 42.91 billion in revenue against its target of Tk 43.85 billion for July-December period.

A senior tax official said the government had set the target for the current fiscal expecting 31.31 per cent growth over the previous year’s revenue collection, but the economy was not moving at the projected pace of growth.

From fiscal 2009-10 to fiscal 2011-12, the corporate tax collection witnessed an average 23.68 per cent growth over the correspondingly relevant previous FY, but for fiscal 2012-13 the government has targeted 31 per cent growth which, as the current trends indicate, is difficult to achieve.

There are 1040 taxpayers, including corporate and individual, under LTU. In the current fiscal, the government transferred a big revenue-earning sector to another tax zone. Last year, the LTU received the revenue as Advance Income tax (AIT).

Analysing the quarterly reports of banks and one major telecom operator, the taxmen found that the profits of Grameenphone and the banks were not increasing significantly, causing a shortfall in the collection of corporate taxes.

“Even, it is a challenge to collect the amount of the previous year’s tax as a large revenue-collecting sector dealing with at-source tax, has been transferred to another tax zone from LTU,” the LTU’s letter said.

Last year, deduction of tax from commission, discount or fees to distributors was under the LTU that had contributed Tk 2.0 billion to the national exchequer, it said.

In the letter, the LTU said the NBR had set 39.29 per cent growth in July-December period of the current fiscal over the corresponding period of the previous one.

For January and February this fiscal, the NBR set Tk 5.75 billion and Tk 10.34 billion as revenue collection targets respectively, expecting 39.82 per cent and 89.72 per cent growth likewise over the corresponding period of the last fiscal.

“The target for February has been estimated, envisaging a 90 per cent growth in corporate tax collection,” the letter added.

Usually, the LTU receives corporate tax in quarterly installments from banks in September, December, March and June in every fiscal.

“Usually in the last month of any fiscal year that ends in June, the NBR receives the highest amount of tax as it is the deadline for submission of tax returns of many companies. Also, a large amount of revenue comes as AIT from the development works of the government,” the letter said.

In a review of last three years’ revenue collection target, it has been found that 33 per cent of the annual revenue earnings was collected in the July-December period, while tax collection was poor in January, February, April and May.

Tax officials said the NBR has equally distributed the revenue collection target for all months that will cause shortfall in revenue collection target for those four months.

Usually in the month of June in every fiscal year, the tax offices collect 25 per cent of their annual revenue earnings.

Source: Financial Express


Please enter your comment!
Please enter your name here