With an aim to curb the submission of fake audited financial statements, the National Board of Revenue (NBR) has directed its field offices to verify each audit report and income tax return filed by any company through the Document Verification System (DVS).
The directive comes two weeks after The Institute of Chartered Accountants of Bangladesh (ICAB), in association with the NBR, unveiled the DVS, an online document verification system, in order to stem tax evasion.
The NBR said the DVS would generate a Document Verification Code (DVC) and every audit report would contain the DVC.
Deputy commissioners of taxes in the field offices will then verify the DVC through a web portal in order to confirm the authenticity of an audited financial statement, according to the directive issued to all tax zones on November 26.
As per the order, the field offices will use the DVC to examine reports prepared after December 1 -- a move that is expected to improve compliance with tax regulations.
Roughly 35,000 companies out of the 78,000 registered taxpayer identification numbers regularly file their annual tax returns. The ICAB earlier said its members annually audit and sign about 16,000 financial statements.
Bangladesh has more than 180,000 companies that are registered with the Registrar of Joint Stock Companies and Firms (RJSC).
The NBR also said it was required to submit audited financial statements with an adequate number of signatures of the company's directors along with the signature of Chartered Accountants in the Companies law.
There is also a provision in the law that empowers a deputy commissioner of taxes to verify the authenticity of audited reports filed by companies, the NBR said.
Field offices will take action as per the income tax law if it is found through the document verification process that the audited financial statements are fake.
Shams Mahmud, president of the Dhaka Chamber of Commerce & Industry (DCCI) termed the NBR's step "very good".
"We fully support the NBR for this move and will also spread the message amongst all our members," he said.
"The DCCI feels this will bring in transparency in the tax return submission process. Genuine business establishments have always found it hard to compete with companies who declare false tax information as these give bad companies who manipulate the balance sheets a competitive edge," he added.
The DCCI chief also said introducing the audited financial report verification system would create a transparent business environment.
Banks will also now be able to rely on audited balance sheets and this will benefit good companies with clean audits. Also, if any unintentional mistakes were made while filing, it will be pointed out by the DVS and teach an important lesson to the businesses about proper filing.
But more than anything, this will significantly increase government revenue in the right manner.
"Overall, these policies will bring transparency and also create a good business atmosphere. Therefore, the NBR should be supported in efforts by all the business communities in Bangladesh," Mahmud said.