Unscrupulous persons evaded a huge amount of tax in the last fiscal through abusing the investment facility under section 19AAA of the Income Tax Ordinance by showing purchase of shares of companies that did not exist.
Officials in the Income Tax Department said the objective, an increase in investment, for which the government had provided this opportunity had failed to be reached due to abuse of the facility.
A BDNEWS investigation revealed that tens of individuals had submitted mere letters of the share-selling enterprises although they were bound to submit photocopies of shares and a certificate from the Securities and Exchange Commission (SEC) as per the Income Tax law.
These people were able to get away, without showing any documents required as per the laws, in connivance with a section of income tax officials.
Officials said hundreds of people evaded taxes abusing the provision of section 19AAA of the Income Tax Ordinance that allowed investment in these sectors without disclosing the source of money. The taxpayers had shown false share-purchase certificates from service and manufacturing companies that did not exist, the BDNEWS probe further revealed.
However, investment in the service sector under section 19AAA of the Income Tax Ordinance ended on June 30 this year although it is allowed in the production sectors in the current fiscal.
That one could purchase shares worth over Tk 6.2 million with an annual income of Tk 85,000 would seem unbelievable to many. But that this shareholder has submitted a mere letter, no share certificate and no SEC letter in the tax return, is true.
The person had purchased 62,320 shares, worth Tk 100 each, of the National Bank Ltd in 2005-06 fiscal and submitted a letter from the bank issued by an assistant vice-president, in the income tax return.
Another person having an annual income of Tk 202,500 was also found to have abused the investment facility under section 19AAA by purchasing shares worth Tk 0.9 million of a company that did not exist. There were no photocopies of the share certificates and SEC document in the income tax return.
"Unscrupulous persons took the chance of the provision in connivance with a section of income tax officials to dodge paying tax worth millions of taka," an Income Tax official preferring not to be named told the news agency.
However, A S Jahir Mohammad, member (Income Tax Policy) of the National Board of Revenue, said that photocopies of one's share certificates had to be submitted as documents, otherwise the papers would not be accepted.
"One has to submit the papers required by the law," he told the news agency. "The Directorate of Inspection is responsible for investigating this sort of tax evasion allegations," he added.
(The above is the second part of a three-part news item on tax evasion.)