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Having settled 16 cases of unpaid taxes through alternative dispute resolution in 2019, the revenue board is now seeking to claim Tk 1.45 billion in interest on VAT paid earlier from the country's leading telecom operators, according to officials.
The officials say the interest was not included in the out-of-court settlements, while telecom companies argue that such unexpected interest claims could deter investors from choosing mediation over courtroom trials.
The Large Taxpayers Unit under the Value Added Tax (VAT) Wing recently identified the outstanding interest during a review of alternative dispute resolution (ADR) cases settled with Grameenphone, Robi Axiata and Banglalink.
Grameenphone would be required to pay Tk 552 million in relation to six previously settled ADR cases, while Banglalink faces a Tk 570 million claim for a 2.0 per cent monthly interest rate on seven ADR cases.
Sharfuddin Ahmed Chowdhury, Head of Communications, Grameenphone said, “Grameenphone has received show-cause letters from the LTU-VAT, seeking a reply regarding why interest shouldn’t be applied to the principal VAT settled through ADRs related to Commercial Space Rent disputes. Currently, we are evaluating these letters, and upon completion of the assessment, we will determine the next steps. As a law-abiding company, Grameenphone consistently fulfils its obligations by paying applicable taxes and duties in accordance with the law. We are committed to resolving any disputes transparently. The Alternative Dispute Resolution (ADR) process, as outlined in relevant laws, provides a transparent avenue for an amicable resolution, and GP has followed this process in specific cases in due compliance with the law.”
Meanwhile, Robi Axiata needs to pay Tk 330 million for interest against three earlier ADR cases.
The telcos say they are surprised by the abrupt claim by the National Board of Revenue (NBR), noting the move could discourage future use of ADR.
However, a senior VAT official said that there was no legal provision to waive interest on previously demanded taxes from corporate taxpayers.
"The ADRs were resolved through mutual understanding with the assistance of an expert facilitator and the interest on taxes was not part of these settlements," he told The Financial Express, wishing anonymity.
"Taxpayers are liable to pay interest on the settled amount from the date the tax was demanded until it is paid," he added.
Previously, the Large Taxpayers Unit recovered interest from Madina Cement on the tax amount they paid after settling their ADR cases.
Revenue officials are also in the process of claiming interests in the ADR case of Sonali Bank.
Shahed Alam, Chief Corporate and Regulatory Officer at Robi Axiata Limited, said they had not yet received a demand letter from NBR but were aware of the investigation.
"We are committed to cooperating fully, but such unexpected claims of interest may discourage investors from using mediation," he said.
According to Mr Alam, both parties agreed to a full and final settlement during the arbitration process, closing the tax demand. "In many cases, despite having strong legal arguments in our favour, we agreed to mediation in the national interest."
"These claims could jeopardise the government's goal of resolving outstanding tax cases through mediation," he added.
Abdul Mannan Patwary, a former VAT member and mediation facilitator, said there was no scope for exempting interest, as facilitators only mediated the settlement of tax claims.
"VAT officials can claim interest on their tax demands at any time, as interest falls outside the scope of ADR," he added.
According to Large Taxpayers Unit data, some 70-80 ADR cases have been settled through mediation between VAT officials and large taxpayers since 2019. The plan is to gradually review all cases to claim interest at a 2 per cent rate per month on the tax payments made.
ADR is a faster way to resolve disputes, benefiting both taxpayers and the government. Following the global trend of successful ADR implementation in tax administration, Bangladesh introduced the method in the 2011-2012 financial year.
However, the process was initially slow due to procedural steps, including the appointment of facilitators. Previously, the NBR reopened some ADR cases after discovering that the government received no tax following the settlement.