MetLife and Green Delta Insurance – two of the country’s leading life insurance companies – have committed irregularities in their tax returns for FY20, depriving the Bangladesh government of Tk 36.98 crore in revenue.
The issue came to light in a latest compliance audit report by the office of Comptroller and Auditor General (CAG), which assessed income tax documents, annual audited financial statements, and other records of the Large Taxpayers Unit (LTU-Tax).
According to this report, Green Delta Insurance’s tax irregularities in FY20 amounted to Tk 20.52 crore, and MetLife’s (also known as the American Life Insurance Company) irregularities stood at Tk 16.46 crore the same year.
It adds that Green Delta Insurance had violated the Income-tax Ordinance by not adding expenses – which cannot be allowed under regulations – to its gross income.
Meanwhile, American Life Insurance had failed to add its expenditure on agent prizes and awards into its gross income.
When approached for comments, a senior official of Green Delta on condition of anonymity said, “This issue has been resolved duly and legally long ago.”
What’re the irregularities?
Green Delta Insurance – a listed firm – had posted TK 23.21 crore revenue for FY20, and paid Tk 7.28 crore in tax to the government against the income shown.
But the company's financial statement showed Tk 54.73 crore expenditure for agency commission for marine, motor, and miscellaneous insurance revenue accounts, which is considered a commission in the insurance sector.
As such, the company’s total income during FY20 was Tk 77.94 crore. According to the Income Tax Ordinance, 5 per cent of the said income is deductible at source.
Green Delta Insurance owes an additional Tk 20.52 crore to the government against its total income, read the CAG report.
Meanwhile, American Life Insurance Company had shown a total income of Tk 615.15 crore during FY20. Against this income, the company paid an income tax of Tk 246.06 crore to the government.
But according to the CAG audit, the American Life Insurance Company showed a total expenditure of Tk 41.17 crore in the annual statement for the period, including Tk 19.13 crore and Tk 22.03 crore in agent prizes and award sector, which have been excluded from income.
The firm’s total income, including the undisclosed figure, during the said period was Tk 656.32 crore.
As per Income Tax Circular 2019-20, on undisclosed income, there is a provision for income tax at the rate of 40 per cent. For this, American Life Insurance will have to pay an additional Tk 16.46 crore to the government, says the CAG report.
On the issue, MetLife Bangladesh Head of Communications Saifur Rahman said, “MetLife has been one of the largest taxpayers in Bangladesh for more than a decade, and we always work with authorities to ensure compliance and transparency in every aspect of our operations.”
The report recommends the collection of total Tk 36.98 crore in income taxes – which is claimed by the CAG audit – from Green Delta and American Life Insurance.
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.”
Meanwhile, in the latest report, CAG stated that 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.