The National Board of Revenue (NBR) has illegally benefited Summit Power, a power generation company affiliated with the Awami League government, by evading income tax to the tune of Tk 1,112 crore.

Abu Hena, the NBR Chairman at the time. Rahmatul Munim put pressure on the Income Tax officials, forcing them to misinterpret the law and issue clarifications (orders) that would have given the company tax concession benefits. It was discovered through an investigation by NBR’s Central Intelligence Cell (CIC) that this facility is being provided unlawfully.

The study found that institutional investors (18.52%), general investors (14.64 percent), Summit Corporation Limited (63.19%), and Eurohub Investment Limited (3.65%) owned the Bangladeshi company Summit Power Limited.

Among them, Summit Power International Limited held 99.99 percent of Summit Corporation Limited’s total shareholding. Summit Power International Limited is a Singapore based company. While Summit Power has collected tax at source from other individuals and institutions during the distribution of dividends, it has not collected it from Summit Corporation.

By issuing a notification on July 1 last year, the NBR declared business income of power plants (after 15 years from the date of production) and capital gains arising from sale of shares in the company tax free. Besides, the money earned by foreigners working in power companies is declared tax-free for 3 years.

At the same time, interest on foreign loans of power companies, royalties payable by companies, technical know-how fees and technical assistant fees are exempted from tax. Dividend distribution by the company is not exempted from tax. However, through two clarifications on January 4 and October 1, NBR Summit Powers exempted Summit International from paying income tax.

According to CIC officials, no dividend has been paid from Summit Power Limited to Summit Power International (a Singaporean company). Dividends are paid to Summit Corporation. In this case, although there is a provision to deduct tax at source at 20 percent, Summit Power Limited has not deducted tax at source.

The company paid a dividend of Tk 1,975 crore in 6 years from 2018-19 to 2023-24. In this case, according to the rules, the company did not deduct tax at source of Tk 318 crore, including penalty which amounts to Tk 465 crore. On the other hand Summit Corporation from 2018-19

2022-23 FY 2022-23 received a dividend of Tk 2 thousand 917 crores in 5 financial years. As Summit Corporation is 99.99 percent owned by Summit Power International, there was a provision to deduct 15 percent tax at source from Summit Power International while paying the dividend. But Summit Corporation did not deduct that tax due to NBR’s clarification.

Singapore has a Double Taxation Avoidance Agreement with Bangladesh. There is a provision of 15 percent withholding tax on dividends under this agreement. A typical Bangladeshi company is taxed at 20 percent on dividends.

The Income Tax Policy Wing recently revoked the two earlier clarifications after the CIC inquiry found this discrepancy. At the same time issued a new clarification. It said that Summit Power Limited will have to deduct tax at source at the rate of 20 percent on payment of dividend to Summit Corporation. At the same time, under the Double Taxation Avoidance Agreement with Singapore, Summit Corporation has to deduct 15 percent tax at source in paying dividends to Summit Power International, a non-resident (foreign) company based in Singapore.

Several income tax officials of NBR told Media, the former chairman of NBR, Abu Hena Md. Summit Power is privileged because of Rahmatul Munim’s keen interest. Since the institution was close to the Awami League government and fearing the chairman, no official at that time had the courage to question the matter. The tax officials are calling this incident as a scandal to allow a large amount of income tax to be evaded by using loopholes in the law.