A LOCAL daily reported on Wednesday that tax evasion by travel agents has taken an international turn as found by the National Board of Revenue (NBR). The report said that dozens of travel agents in Bangladesh engaged with international airlines and hotels have been evading tax on their commissions and other incentives received during their operation. The travel agents concealed their full incomes by leaving out incentive bonuses and other commissions they get from various service providers of the Global Distribution System (GDS).
According to reports, GDS is a worldwide computerised reservation network used as a single point of access for reserving airline seats, hotel rooms, rental cars, and other travel related items by travel agents, online reservation sites, and large corporations. Even though our tax authority has not yet calculated the actual amount of tax evaded by the various travel agent firms, roughly Tk 50 crore taxes seem to have been dodged by 27 travel agent firms. Anomalies were detected by the NBR after its Central Intelligence Cell (CIC) looked into the tax files of a few travel agents. The annual aviation market is worth around $440-million and involves 5.8 million passengers, which in turn generates a large amount of commission and incentive bonus, industry insiders clarified.
Travellers buy tickets by paying an extra amount when the demand for tickets for certain destinations or purposes, such as hajj, go up and sometimes a section of travel agents offer tickets below the fares set by carriers. This affects the carriers’ revenue and encourages price competition among travel agencies. Reports also state that tax officials were not aware of such practices before the investigation. With around 2,500 travel agents in the country under Association of Travel Agents of Bangladesh sought waiver from the penalties citing that they did not evade the tax willingly and were unaware that under the Income Tax Ordinance, ‘commissions or incentive bonuses’ are considered as taxable income. The agents claimed they shared the extra revenue with their sub-agents to expand business and the commission that they got from GDS service providers is used for maintenance of IT equipment.
In order to tackle the issue, the NBR will be imposing 3 percent withholding tax on travel agents’ income as commission, discount and incentive bonus. To make matters more convenient, airlines and their general sales agents will have to deduct the tax during such payments to travel agents and deposit the money to the state coffer, according to the NBR. Hopefully such lack of awareness will be diminished in the future so that no one can be involved in criminal practices, even unwittingly.
