The National Board of Revenue (NBR) is alleging that many insurance companies are using new ways to avoid value-added tax (VAT), according to sources at the board.
NBR’s Large Taxpayers Unit for VAT (LTU-VAT) recently found tax evasions totaling Tk4.37 crore by seven insurance companies in four years in an internal audit.
According to the audit, Green Delta Insurance dodged Tk98.15 lakh, Reliance Insurance Limited Tk4.90 lakh, Pragati Insurance Limited avoided Tk38.60 lakh, Pioneer Insurance avoided Tk1.24 crore, Phoenix Insurance Company Limited avoided Tk31.79 lakh, Eastland Insurance Company Limited avoided Tk52.64 lakh and Rupali Insurance Company Ltd avoided Tk1.15 crore in a four-year period from 2013.
In this particular case, the companies allegedly avoided tax by misreporting mobile handset imports.
Under NBR rules, importers have to pay a VAT of 1.20% when importing mobile phone sets, but a special facility allows telecommunications companies to pay 0.15% VAT when importing mobile phone sets.
According to NBR officials, these seven insurance companies all classified general importers as telecom companies when paying their VAT, thereby dodging a total of Tk4.37 crore, or 1.05% VAT in every premium from July 2013 to September 2017 period.
The LTU-VAT Commissioner Md Matiur Rahman told the Dhaka Tribune: “After scrutinizing the annual reports of seven insurance companies we found that they had evaded around Tk4.37 crore in taxes by paying an inappropriate tax rate for their premiums and it was unearthed through an internal audit of the unit.”
“We have issued separate show-cause notices to the companies in this regard.”
The notice directed the seven companies to explain why the amount should not be paid within 15 days of issuance of the notices (on January 10).
“The companies will have to respond in-writing within the stipulated time or they can also seek hearings to explain their position. The VAT office will issue the final demand notice based on the reply of the companies,” added Matiur.
When contacted, Bangladesh Insurance Association (BIA) President Sheikh Kabir Hossain told the Dhaka Tribune: “If the companies avoided the VAT, they must pay it.”
“But this is some NBR officials who want to boost their performance reports. They issued notices on a disputed issue without any prior discussion, which damaged the reputation of the firms.”