NBR initiates real-time account access, businesses fear trade secret exposure
The National Board of Revenue has initiated the process of connecting its Integrated VAT Administration System (IVAS) with the accounting software of companies in its bid to curb VAT evasion by large firms.
Under its VAT Online Project, the NBR has already established connectivity with the accounting systems of two cement companies on a pilot basis.
By February, the VAT authorities will commence full-fledged connectivity with them, and by March, more companies will be brought under the software system.
"Currently, more than 150 business entities are using the NBR-designated accounting software, and we will establish connectivity with all of them beginning next month," Project Director Kazi Mustafizur Rahman told The Business Standard.
Md Shahidullah, vice president of the Bangladesh Cement Manufacturers Association, said the connectivity with the accounting software of some companies belonging to the association has already been established.
"We have been informed that connectivity with the remaining companies will be established soon," he told TBS, adding that currently 34 cement companies are using the software with specifications prescribed by the NBR.
However, a section of companies does not consider the initiative positively due to the fear of exposure to trade secrets.
Naser Ezaz Bijoy, former president of the Foreign Investors Chamber of Commerce and Industry (FICCI), told TBS, "Companies' software has specific features. If there is constant connectivity with this software, what guarantee is there for its confidentiality to be maintained?"
Naser, who is also chief executive officer at Standard Chartered Bank, Bangladesh, said, "Instead, information may be requested from the VAT authorities as and when required, or an audit can be conducted if there are any doubts."
Earlier in August 2022, the Large Taxpayers Unit, known as LTU-VAT of the NBR, sought the user IDs and passwords of the accounting software from 111 entities. But, faced with strong opposition from businesses, the VAT authorities backtracked on that move.
NBR officials say some companies maintain accounts in the software but do not provide accurate information to the VAT department. The NBR has already identified such irregularities in some companies.
"After initially establishing connectivity with companies in the cement sector, it will be expanded to other manufacturing sectors, including pharmaceuticals," Kazi Mustafizur Rahman told TBS.
He said, "For those companies not using the software, an initiative will be taken to encourage them to use the NBR-designated software.
"Once this programme is fully implemented, there will be transparency in the accounting system of the companies, and it will reduce the scope of irregularities."
In a 2019 order, the revenue board made the use of software with specifications prescribed by the NBR mandatory for companies with an annual turnover of more than Tk5 crore.
According to NBR sources, aside from 150 companies, most with a turnover above Tk5 crore are still not using this type of software.
However, the NBR did not provide the number of companies not complying with the terms of use of the software. Moreover, sources indicate that more than half of the VAT collected by the NBR comes from companies that are using the software.
According to sources, after examining the accounts of three cement companies in 2022, the LTU-VAT office found evidence of VAT evasion through the submission of false information.
The VAT authorities found information about maintaining multiple accounts by the same company.
However, representatives of other companies argue that it is not logical to treat everyone equally because of the irregularities of some.
A senior official at a leading mobile phone company told TBS on condition of anonymity, "There is no other country in the world that has round-the-clock access to company software. Every company has a business policy, and by integrating it with the VAT department, our business policy or secrecy will be at risk of exposure to competitors."
However, Bangladesh Cement Manufacturers Association Vice-President Md Shahidullah said, "We have no objection to the way NBR wants to obtain information."
Former NBR member Md Farid Uddin believes that to bring about transparency in the accounting system and VAT payments of companies, there is no alternative to software integration.
However, he told TBS, "The NBR system needs to be updated, taking into account the concerns of businessmen, so that the business secrets of the companies are not exposed."
"And it's not only the 150 entities. All the companies expected to use the software should be included, ensuring a level playing field for all. Otherwise, this initiative will not be successful," he added.