1. Bangladesh telecoms caught up in USD 500 million tax row

Bangladesh telecoms caught up in USD 500 million tax row

By government accounts, four foreign-backed cellphone operators owe USD 500 million to Bangladesh in unpaid taxes.

By: | Dhaka | Published: October 30, 2016 10:17 PM
spectrum auction, indias biggest spectrum auction, spectrum auction india, spectrum auction starts saturday, saturday auction for spectrums Industry experts say the standoff may alienate companies and spook investors in this country of 160 million people. (PTI)

By government accounts, four foreign-backed cellphone operators owe USD 500 million to Bangladesh in unpaid taxes. By the companies’ accounts, the figure is closer to USD 50 million if it isn’t zero.

As the legal row drags into its fourth year without resolution, telecommunications analysts warn it is putting pressure on the industry that is Bangladesh’s single largest source of revenue, providing USD 1.43 billion in tax revenues in 2015.

Government regulators say the companies broke the law by selling old SIM cards without properly notifying regulators, and then failed to pay taxes on those sales from July 2009 and December 2011.

They also allege the companies concealed customer information to obscure the issue, according to government legal documents on the case.

The four companies Norwegian Telenor’s subsidiary Grameen Phone; Egypt’s Orascom Telecom’s Banglalink; Robi, the Malaysian-Japanese joint venture Robi Axiata Ltd; and India’s Bharti Airtel’s subsidiary Airtel have rejected the government’s demands, taking the claim to the tax appellate tribunal.

Both the government and its tax authority refused comment while the case is still under court review.

Industry experts say the standoff may alienate companies and spook investors in this country of 160 million people.

British-based Vodafone is facing a similar case in India, where authorities want USD 2.5 billion in back taxes from an asset purchase done before Indian legislation in 2012 made such deals subject to taxation.

Most of the 128 million mobile-phone subscribers in Bangladesh are customers of one of the four private companies involved in the tax dispute.

“The government must think of the issue from the point of view that this is the largest foreign investment sector in the country,” said TIM Nurul Kabir, who heads the Association of Mobile Telecom Operators of Bangladesh lobbying consortium. “The industry is suffering for this dispute.”

Telecoms companies and their investors are growing more cautious about building a rural cellphone network, said Abu Saeed Khan, a Bangladeshi telecommunication expert who works as a senior policy fellow of the Colombo-based LIRNEasia think tank.

“Business confidence is feeling the pinch,” he said. Khan said Asian regulators don’t understand how to effectively tax telecoms companies, and end up going back for more later. In Bangladesh, “the dispute involves some grey areas from the regulators’ side … and operators used these grey areas for their own benefit.”

The case erupted in 2012, when the government handed the four foreign-backed subsidiaries the bill for back taxes totaling about USD 500 million combined.

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