NBR urges Islami Bank to settle 14-Year Tax disputes via ADR

Tax cases spanning 14 income years are pending with the High Court as the bank cites financial constraints

The Large Taxpayers Unit (LTU) of the National Board of Revenue (NBR) has asked Islami Bank Bangladesh PLC to settle income-tax disputes involving Tk 4.68 billion, pending with the High Court, through the Alternative Dispute Resolution (ADR) process.

The LTU issued a notice on September 27, asking the bank to submit issue-wise explanations and supporting documents by October 12 to facilitate an early settlement of the disputes.

The disputes involve 14 income years, according to a letter sent to the bank's managing director by Md Mustafizur Rahman, commissioner of taxes at LTU Dhaka.

The largest disputed amount, Tk 1.82 billion, relates to the 2020-21 tax year, followed by Tk 1.22 billion for 2019-20. Together, the two years account for Tk 3.04 billion, or nearly 65 percent of the total disputed tax.

The disputed tax for 2009-10 stands at Tk 518.2 million, while another Tk 353 million relates to 2018-19. Disputes concerning 2021-22 involve Tk 233 million.

The remaining disputes relate to income years from 2002 to 2009 and 1997, involving varying amounts. The oldest case dates back to the 1997 income year, corresponding to the 1998-99 assessment year.

Push to resolve long-pending tax cases

The LTU's move follows an NBR directive issued on July 6 and instructions given by the finance minister at a meeting on August 13 to prioritise out-of-court settlement of tax cases pending with the High Court through ADR.

The tax authority has asked the bank to provide the necessary explanations and evidence within the stipulated deadline so that the disputes can be resolved under the ADR mechanism.

The initiative is part of the government's broader effort to resolve long-pending tax litigation and recover disputed revenue without waiting for prolonged court proceedings.

The ADR mechanism allows taxpayers and tax authorities to seek settlement of tax disputes through an alternative process, potentially reducing the time and cost involved in litigation.

Bank cites financial constraints

M Kamaluddin Jasim, additional managing director of Islami Bank who is currently serving as acting managing director, said the bank was once among the highest taxpayers in the banking sector and had always been willing to pay its due taxes if its financial condition permitted.Access Services

"The bank's current financial condition is now too weak to pay the taxes," he said.

Islami Bank's financial position started deteriorating after 2017. Its profitability has kept declining, while it has had to disburse profits to depositors.

The bank was taken over by S Alam Group in 2017. The controversial conglomerate later extended around 80 per cent of the bank's total loans to its own companies and associated firms, according to available records, violating banking rules and regulations.

Following the fall of the Awami League government in August 2024 after the July mass uprising, the bank was freed from the group's control and began operating under the supervision of Bangladesh Bank.

ADR requires commitment from both sides

Islami Bank was also the largest holder of non-performing loans among banks as of June this year. Of the banking sector's total NPLs of around Tk 6.0 trillion, Islami Bank accounted for about Tk 989.14 billion, or 52.15 per cent of its disbursed loans.

Former ADR facilitator Syed Aminul Karim, also a former member of the NBR's income tax policy wing, said the ADR process requires willingness from both tax officials and taxpayers.

"The out-of-the-box settlement process must not be initiated only for spending time," he said.

The ADR law also needs revision so that officials involved in approving settlements are not held personally responsible for potential revenue losses, he added.