The National Board of Revenue (NBR) has come away from their hard stance of introducing a verification system of financial reports of large taxpayers.
The large taxpayers will now only have to provide requisite data or read-only auditing credentials with the value added tax (VAT) authorities, instead of the previous central user ID and password sought earlier.
After holding several meetings with the leaders of large corporations, who are members of the Metropolitan Chamber of Commerce and Industry (MCCI) and the Foreign Investors Chamber of Commerce and Industry (FICCI), the VAT authorities under Large Taxpayers Unit (LTU) of the NBR conceded on a consensus decision.
A senior official concerned said the VAT authorities and the large taxpayers reached a consensus, in principle, on this new tax-file-verification method --measured by the revenue authority for averting any understatement and underpayment of taxes.
However, official sources said the process of giving access to the accounting software might take some time, say, about four to five months, as taxpayers will have to modify their accounting systems to make it accessible to the VAT authorities.
The issue triggered concerns among the large corporate taxpayers after the LTU-VAT, on August 3 earlier, issued an order to all of its taxpayers for sharing their user ID and password in read-only form with the VAT officials for auditing purposes.
Only seven days were given to corporates to comply with.
Earlier, the MCCI and FICCI sent letters urging the LTU to reconsider its order.
Following their proposals, the LTU VAT wing held its first meeting with the chamber of foreign investors on August 30, 2022 and a second one last week.
"We have agreed to relax the order as the VAT official would need only data for auditing purposes to cross-check VAT payments by the companies," said Wahida Rahman Chowdhury, commissioner of the LTU-VAT.
The LTU also held a meeting with MCCI leaders on August 23, 2022, in the process finding an acceptable pathway.
Industry-insiders said multinational companies use customized software as prescribed by its parent companies.
As such, MNCs feared several "risk-factors, including cyber-attack, data privacy, disclosure of price- sensitive information of manufacturing companies and negative impact on foreign direct investment (FDI)", they said.
FICCI members raised a few points in the meeting, including legal basis of such order in the VAT and Supplementary Duty Act 2012, preparedness of the NBR to access the VAT- accounting system of MNCs, technical upgradation of LTU for ensuring data protection of large taxpayers' information and so.
For sharing the auditing credentials in read-only format, the MNCs will have to obtain permission from their parent companies by giving satisfactory explanation.
