Bangladesh lost $5.8m due to BATB’s profit shifting: rights group
Bangladesh has lost $5.8 million in tax revenue in 2016 due to profit shifting in forms of royalties, fees and IT charges by British American Tobacco Bangladesh, according to a recent report of Tax Justice Network.
The UK-based tax rights group in the report said from 2014 to 2016 BAT Bangladesh shifted profits on average $21 million a year by paying royalties, fees and IT charges to related companies in the United Kingdom and the payments were equivalent to nearly 15 per cent of BAT Bangladesh’s pre-tax profits over the three years.
In that way, the company in 2016 reduced its Bangladeshi tax bill by an estimated $5.8 million, said the report titled ‘Ashes to Ashes: How British American Tobacco Avoids Taxes in Low and Middle Income Countries’.
TJN, however, published a response of BAT on the Bangladesh part of the report.
‘As a listed company BAT Bangladesh is also regulated by the Bangladesh Securities and Exchange Commission Act. The local board of directors is required to approve all royalties and fees before these can be remitted,’ BAT said.
Post board approval, invoices and detailed calculations are provided to the central bank (Bangladesh Bank) for review and approval and on top of that, before remittance an application is made to Bangladesh Investment Development Authority for approval, it said.
According to the report, BAT Bangladesh shifted royalties just over $5 million to British American Tobacco (Holdings) Limited, technical and advisory fees of $10-12 million a year to BAT Investment Ltd and more than $5 million in payments a year for IT services to BASS GSD Ltd.
The report said that Bangladeshi corporate tax rate of 45 per cent in 2016 for tobacco companies on the amount would have yielded around $9.5 million in each year, on average.
BAT Bangladesh shifted the amount just paying $3.7 million in withholding tax at the rate of 10 per cent to 20 per cent on transfer of royalties, technical and advisory fees and IT charges.
The report also said that in 2016 BAT Bangladesh made a net profit of around $88.9 million (Tk 760 crore), much less than the estimated $1.9 billion (Tk 15,800 crore) of economic damage caused by smoking.
