For unpaid tax, businesses may find utilities snapped

Highlights 

• Deputy commissioners of taxes will order the utility shut-offs 
• Businessmen oppose the move, terming it "illogical"
• Current undisputed taxes amount to around Tk2,000cr  
• Cases ongoing over Tk34,000cr tax claims 

The upcoming national budget is going to propose empowering revenue officials to cut power, gas and water supplies to tax defaulting factories – a measure that hints at a stringent position of the government against tax evasion.

According to finance ministry and revenue board officials, there are already provisions allowing the revenue authorities to shut down or take over tax defaulting businesses. But implementation of such measures is rare, leaving the legal provisions ineffective.

Now the authorities are thinking about empowering the deputy commissioners of taxes (DCT) with the utility-snapping power, as businessmen termed it "illogical".     

Representatives of different trade bodies say businessmen in other countries are enjoying several tax cuts to counteract Covid and war-led global fallout. But if the government comes up with such a decision in the budget, it would send a negative message to local entrepreneurs and investors.

But taxmen argue that it is impossible to collect undisputed taxes from businessmen unless the government gets tough and exercises such power.

Tax claims that are yet to be settled in the Taxes Appellate Tribunal, the High Court or the Appellate Division are disputed taxes. In contrast, in cases where the revenue board has won the trials, or the taxpayers do not respond to revenue board's tax claims, the tax defaults are considered undisputed taxes.

Md Alamgir Hossain, a former member of the revenue board who was engaged with last fiscal year's budget preparation, explained how tax claims go undisputed.

He said, "A disregard for tax notices by a taxpayer due to carelessness, changing addresses or improper notice serving ultimately results in undisputed taxes. Plus, court rulings in favour of the revenue board often lead to the undisputed taxes."              

According to the revenue board, current undisputed taxes amount to more than Tk2,000 crore, while a whopping Tk34,000 crore is caught in legal battles.

Strict laws with a lax implementation

According to the current Income Tax Ordinance, the authorities can lodge lawsuits against tax defaulting businesses with the respective Deputy Commissioner's (DC) office. The DC office will then task someone to realise the taxes.

The law says that the deputy commissioners of taxes can freeze and shut the tax defaulting factories until the recovery. They also can ask banks to freeze the bank accounts of the businesses.

However, field level tax officials said they do not go for the harsher measures except bank account attachment.  

A DCT of a tax zone in Dhaka preferring anonymity said he never heard of shutting any tax defaulting business. He said tax lawsuits are not very effective either.   

"We have around Tk400 crore of undisputed taxes in my zone alone. But we never opted for closing the business," he added.  

'Demanding dues after shutting factories illogical'  

Manzur Ahmed, advisor of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and also a trade law expert, told The Business Standard that demanding tax defaults after shutting the businesses is illogical.

Syed Md Aminul Karim, a former revenue board member, told TBS that getting tougher to realise the defaults is not illogical.    

However, former revenue board member Md Alamgir Hossain snapping utilities of the defaulting businesses might be challenging.

He expressed concern over abuses of the power and further legal issues stemming from the utility shut-offs. Alamgir Hossain also questioned such a move amid a tumultuous business situation across the globe.