Grameenphone Ltd, the country’s leading telecommunications service provider, committed irregularities in its tax returns for FY20, which in turn deprived the Bangladesh government of Tk 7.22 crore in revenue.
A latest compliance audit report by the office of Comptroller and Auditor General (CAG), which assessed work records and documents of LTU Dhaka and Chattogram offices, shed light on the matter.
GP had violated the Income-tax Ordinance by not adding expenses – which cannot be allowed under regulations – to its gross income, and paying source tax less than the applicable amount, the report points out.
It adds that the CAG audit has unearthed a number of financial irregularities and violations, which was caused by an ineffectual internal control system and non-compliance with regulations.
However, only Serious Financial Irregularities (SFI) has been included in the audit.
In FY20, Grameenphone paid Tk 2,536.82 crore in corporate taxes on their gross income of Tk 6,342.06 crore. However, the CAG audit has found that GP’s actual gross income was Tk 6,360.12 crore that year, and the applicable tax on the earnings was Tk 2,544.05 crore.
This indicates that the telecom operator paid Tk 7.22 crore less in taxes.
What’re the irregularities?
According to the CAG report, the taxpayer company had submitted its annual report for FY20 while filing returns. In which, Grameenphone had kept Tk 46.24 lakh provision for Asset Retirement Obligations (ARO), but it was not spent that year.
The additional provision was kept for the future. Such a provision is not deductible as per the ordinance, and should have been added to the gross income.
Grameenphone showed Tk 1,053.02 crore expenses in commissions on sales, marketing and commissions in their annual report. On such expenditure, 10 per cent or Tk 105.30 crore taxes is deductible at source according to the ordinance.
However, Tk 103.54 crore taxes were deducted at source in 29 invoices, meaning the telecom operator did not pay around Tk 1.76 crore in source taxes to the national exchequer. When considering the 10 per cent source tax, this amount reaches Tk 17.59 crore income.
Forty per cent corporate tax is applicable on this figure, because such expenditures are not deductible, and must be added to the gross income of the company in accordance with the law. Such irregularities violated the ordinance clause 29, 30 (AA) and 53E (1), the CAG report reads.
The Business Post tried to reach Grameenphone CEO Yasir Azman for his comments on the matter, but he could not be reached on phone till the filing of this report.
Meanwhile, GP Head of External Communications Ankit Sureka said he will check on the matter, and provide an update later.
GP recently settled with NBR
The report recommends collection of Tk 7.22 crore in income taxes – which is claimed by the CAG audit – from Grameenphone Ltd.
The CAG, on multiple occasions, had requested the National Board of Revenue (NBR) chairman to respond to irregularities unearthed by the compliance audit report, and claims of Serious Financial Irregularities (SFI), but he is yet to provide any clarification on the matter.
Commenting on the issue, Director General of Directorate of Revenue Audit Md Bodiuzzaman, who signed the CAG audit report, said, “This report has been discussed in parliament. Overall losses suffered by the government due to irregularities within the LTU could be much larger.”
Grameenphone had recently cleared all its corporate income tax disputes with the NBR through the alternative dispute resolution (ADR).
To settle the issue, the multinational telecom giant on June 18 this year made a deal with the NBR’s large taxpayers unit (LTU) for resolving the tax disputes in the assessment years 2007-08 to 2019-20.
The listed company on June 19, just a day after the agreement signing, paid the entire tax liabilities worth Tk 783.32 crore to the exchequer through a pay order.
Confirming the matter, GP CEO Yasir Azman sent a letter to the LTU tax commissioner on June 20.
This letter mentions that all the outstanding tax matters, disputes, and demands charged against Grameenphone by the NBR for 13 years up until FY20, will now be considered fully settled.
Meanwhile, in the latest report, CAG said the Bangladesh government missed out on Tk 126.33 crore in FY20 due to 19 counts of irregularities found within the Large Taxpayers Unit (LTU-Tax wing), which works under the NBR.
These losses account for 0.61 per cent of the total revenue collected by the LTU in FY20.
