Indian investors raise taxation concerns

FT ONLINE

Major Indian investors in Bangladesh have raised a set of concerns over taxation-related matters, including taxes on the repatriated profit.

The concerns came at a recent meeting of India's CEO Forum held in Dhaka.

Country heads of the Indian companies made their respective recommendations to the Principal Coordinator (SDG affairs) of the Prime Minister's Office (PMO) Abul Kalam Azad.

Capping the discussion, Indian deputy high commissioner Dr Adarsh Swaika recently put forward the proposals of the CEOs to the National Board of Revenue (NBR) and also to the office of the principal coordinator (SDG affairs).

Top officials of Bayer CorpScience Limited, Gulf Oil Bangladesh Limited, Arvind Limited and Jet Airways raised their concerns over different tax-related issues and their operational problems.

A letter of the Indian High Commission, which was sent to the NBR, compiled the detailed suggestions and proposals of the CEOs of those companies.

The top boss of Jet Airways said revenues from the operations of aircraft on international route should be taxable only in India, not in Bangladesh.

The airlines said they are asked to pay taxes as per Finance Act-2018 on the surplus fund that they repatriated out of Bangladesh.

"… profit derived by an enterprise of India from the operation of aircraft in the international traffic shall be taxable only in India," the letter said quoting Jet Airways as saying. The company referred to the article-8 of the double taxation avoidance agreement.

Income tax member of NBR Kalipada Halder said the airliner will have to submit a 'tax residency certificate' to the NBR to avail of the benefit of double taxation avoidance treaty.

"It's true that their tax would be payable in India, not in Bangladesh. But the company needs to prove their tax residency is in India," he added.

Jet Airways also proposed involving the third party in ground handling at the Dhaka airport to improve the service.

"Currently, ground handling is mandated to be done by Biman Bangladesh for all foreign airlines. However, local private airlines are allowed to do self-handling. Services can be improved if the third party handling is allowed at the Dhaka airport," the Jet Airways authority suggested.

Gulf Oil Bangladesh limited raised complaints over uneven playing field for the investors who pay proper Value Added Tax (VAT) on the import of lubricants.

"Most of the local lubricant manufacturers (except the leading one Mobil Jamuna) bring in base oil on tariff value declared by the government (US$850) and after manufacturing sell finished goods with the mark up (customs duty plus government-guided mark up of 26.66 per cent plus VAT)," the company said.

However, the VAT chalan issued by them is at nearly the same price at which they are importing, it said.

The petroleum company said VAT is being paid by the companies at lower value, causing loss to the government revenue.

"Companies like Gulf oil, which import at the right price, find it difficult to compete due to the price (VAT) difference," it added.

Buyer CorpScience Limited said corporate tax rates for multinational companies are becoming "unreasonably high" due to disallowance of genuine expenses by taxmen.

It also alleged that taxmen arbitrarily determine higher revenue and higher gross profit.

"It may be pointed out that the MNCs (Multinational Companies) maintain their books and records very transparently and comply with all the laws of the land in doing their businesses," the company said.

It also urged the government to offload shares of MNCs to help them work with full independence and realise their full potential of their continued investment.

"Many MNCs have partnership with the government from the past (due to nationalisation after the liberation war). However, there is no clear roadmap from the government with regard to offloading of those shares," it said.

Arvind Limited, an apparel manufacturer, proposed allowing fabric import through Sonamasjid port.

The company also proposed converting private warehouse into customs bonded warehouse in the port and issuing pass book to the garment vendors for using the Sonamasjid route.

NBR officials said they are examining the proposals of the Indian investors to resolve the issues.