National Board of Revenue has offered British American Tobacco Bangladesh tax relief worth more than Tk 2,000 crore in the proposed budget through scrapping a special order with retrospective effect.
NBR on Friday issued a special order scrapping the previous one issued on July 1, 2017, which had imposed additional taxes on low quality international-brand cigarettes.
The revenue board had then set the price of the cigarette at Tk 35 per 10 sticks produced and sold by multinational companies and imposed supplementary duty at the rate of 55 per cent.
The price of same quality cigarettes produced and sold by local companies was set at Tk 27 per 10 sticks and imposed 52 per cent SD to protect local manufacturers.
As per the Friday order, price and supplementary duty for the local tobacco products will also be applicable for the low quality international-brand cigarettes retrospective effect from June 1, 2017.
A number of NBR officials expressed disappointment over scrapping of the provision with retrospective effect as the measure would facilitate tax relief worth Tk 2,000 to the BATB.
From the beginning of the fiscal year 2017-2018, the Large Taxpayers Unit of the revenue board continued requesting the BATB to pay the SD and VAT on the cigarette in line with the order.
But, the company paid the SD and VAT on Tk 27 like local companies and declined to pay the SD and VAT on the additional portion of the price (Tk 8) questioning the legality of the measure.
BATB also sold the cigarette at Tk 27 per pack instead of Tk 35.
Officials of the revenue board said that the aggregated arrears in SD and VAT stood at more than Tk 2,000 crore till May.
They said that LTU almost in every month wrote to the NBR seeking its direction on next steps including issuance of demand notice.
LTU took several moves to issue demand notices for realising the arrears but failed due to reluctance of finance minister.
VAT wing of the NBR verbally asked the LTU not to take any steps saying that finance minister asked not to take any step on the issue.
Officials said that BATB lobbied with the government high-ups including finance minister and NBR top officials against the differentiation in tax measures between domestic and international companies.
They argued that revenue board could not discriminate in taxation between foreign investors and local investors as the Foreign Investment Protection Act 1980 prohibited such discrimination.
When asked about the issue, BATB managing director Shehzad Munim on Saturday told New Age that it was a ‘very good decision as there was no legal basis for the discrimination’.
‘There was no statutory regulatory order (SRO) ever approved to enforce the so called differentiation. So, we believe the government just corrected the mistake of last year,’ he said.