The tax burden on entities that withhold tax at source, including businesses, banks, NGOs, government agencies and other employers, would increase significantly if they did not deduct withholding tax from applicable expenses.
Organizations should pay taxes at the normal corporate rate on expenses, regardless of corporate profits or losses, as the National Revenue Council would not accept the expenses as eligible costs for tax exemption in the event of failure of withholding tax at source.
The Minister of Finance AHM Mustafa Kamal proposed an amendment to the Income Tax Ordinance-1984 in the budget through the proposed Finance Law-2019.
Under current income tax law, tax officials could ban expenses for which TDS was not performed, NBR officials said.
But, in many cases, tax officials have been unable to collect tax on unauthorized expenses because many tax deduction authorities pay minimum tax or have a loss on tax returns, have they declared.
NBR proposed to make the amendment to ensure compliance by withholding authorities and collect the appropriate tax, in the event of non-compliance with the provision, they added.
Under the proposed amendment, refusals would be treated as business or professional income and tax should be payable thereon at the regular rate, depending on the minimum tax provision or any profit. or loss.
Typically, withholding authorities request a tax exemption on the expenditure on which the tax deduction was made.
For example, the amount of wages paid to employees would be considered an eligible expense of the employer and there would be no tax on this expense.
According to the Income Tax Law, TDS entities withhold tax at source in 58 sectors, including wages, supply of goods and performance of contracts, interest on securities, bank deposits, dividends, payments to non-residents and export earnings.
Currently, several public and private entities, known as withholding authorities, were responsible for deducting the tax.
According to another amendment, tax officials would value the price of stocks and shares purchased by a taxpayer from any business in accordance with the fair market value system in order to avoid tax evasion by suspecting that the stocks and shares were traded. at a lower price.
The difference between the price paid and the fair market value would be considered income from other sources and would be taxed.
A senior tax official said the provision would apply to transactions in shares and shares of limited liability companies.
He said that many shareholders have concealed the actual transaction prices by stating the original purchase prices of shares obtained long ago. For example, a stock can be bought at 100 Tk ten years ago, and the current share price may rise to 500 Tk.
A shareholder sells the stock at market price, but declares the price at acquisition cost to avoid tax, the official said.
He also proposed to subject banks and non-bank financial institutions to regular audit procedures by removing a special exemption facility for the sector.
Right now, taxpayers, whether individuals or businesses, could avoid the audit by showing their tax returns at least 15% more income than previous tax returns.
Kamal proposed to withdraw the benefit from financial institutions.
NBR officials said the NBR’s Large Taxpayer Unit could not audit most banks and financial institutions after the provision included in the Income Tax Law in 2016.
Following LTU’s request, NBR recommended the withdrawal of the benefit for financial institutions, they said.