The National Board of Revenue (NBR) is making it mandatory for scheduled banks to get its approval before disbursing loans to any businessmen or companies, in a bid to curb VAT (value added tax) evasion.
The banks will have to follow the condition for giving loans to all types of businesses, excluding 100 percent export-oriented companies.
The NBR further pointed out that if any loans are disbursed to businesses without its approval and then if any loan recipient's audit report is found inconsistent with their VAT return information, bank officials concerned will be charged over VAT evasion.
In this regard a notice ─ signed by Syed Mushfequr Rahman, director general of the VAT Audit, Intelligence and Investigation Directorate (VAT Intelligence) under the NBR – was sent to the Bangladesh Bank on June 18.
The VAT Intelligence also asked the central bank to take necessary action for implementing the decision in all scheduled banks.
After the NBR launched the VAT Online Services in December last year, around 150,000 organisations registered for it. Among these companies, about 38,000 submit their VAT returns online, and the rest are still using the previous system.
Under these circumstances, some believe that the recent NBR move of VAT return verification will raise concern among businessmen and bankers.
Brushing aside such concerns, Syed Mushfequr Rahman, director general of the VAT Intelligence, said, "Ninety-nine percent of the businessmen submit one type of information in their VAT returns and another to banks while taking out loans.
"Because of this, the government is being deprived of revenue. This initiative has been taken to curb VAT evasion."
He further said, "The businessmen and bankers will not face any hassle over this decision. When a branch is sending a loan application to the bank's credit officer, they can just email us a copy.
"We will scrutinise the applicant's sales and purchase information mentioned in the VAT return, and compare it with their financial statement submitted to the bank. Then we will inform them."
Adding that the banks must take clearance from VAT Intelligence before disbursing any loans to businesses, Syed Mushfequr Rahman said, "We will take a maximum of seven working days to provide clearance to banks.
"Before any loan is disbursed, banks have to do a lot of work such as visiting applicants' factories and land valuation, which takes a lot of time. We will give the banks clearance before those processes are complete."
Responding to a query, Managing Director and Chief Executive Officer Mohammad Shams-ul Islam of Agrani Bank said, "The NBR should have asked the businesses to apply for loans on the basis of information submitted in their VAT returns. There is no point in giving the instruction to us.
"It would have been easier if the NBR had a database of turnovers of all companies. The duty should not have fallen on the bankers' shoulders. The banks must follow the government laws and regulations. More discussion is needed on the matter. Let us see what happens next."
Commenting on the matter, business leader Shafiul Islam Mohiuddin said, "Instead of expanding the VAT net and other activities, the NBR is creating a concerning situation for taxpayers. The revenue board has taken no initiatives for increasing their own capacity and the VAT net.
Shafiul, a former president of the Federation of Bangladesh Chambers of Commerce & Industries, further said, "The new VAT law was implemented in this fiscal year, but no initiatives to expand the use of technology have been taken as yet.
"I am optimistic that the NBR will focus on expanding the use of technology and reforming the tax structure, instead of creating a concerning atmosphere."
Meanwhile, VAT Intelligence Director General Syed Mushfequr Rahman said, "When a contractor submits a bank guarantee against a tender, banks send it to us for scrutiny. The new initiative will use the same process."
"Our priority concern is to conduct the verification centrally so that no bankers or businessmen have to face any hassle. A bank's managing director or chief credit officer will send us the certified copy of the applicant's financial statement along with the credit memo."
He added that the NBR will not accept such information from the applicants.
VAT Intelligence officials believe that the initiative is possible to implement despite criticism from the businessmen, if the government does it with sincerity.
They added that the move – if implemented properly by all banks – will shut down a way for businessmen to evade VAT and also bring down the possibility of businesses defaulting on loans.
The initiative will help bring down the irregularities of field level VAT officials, and businesses will lose interest in providing extra benefits to those officials for a chance to evade VAT, they said.