Saleh Ahmed Hussain: Tobacco is injurious to health. Still, the government does not ban tobacco considering the revenue. Day after day multinational companies are making billions of taka in profit. Despite earning huge profits, the country’s second largest cigarette manufacturing company, Dhaka Tobacco Industries, has evaded about Tk 11 thousand crores in customs duties.
Evidence of huge amount of evasion of additional duty, VAT, surcharge and VAT at source was found in four years from 2014-15 to 2017-18 financial year through various tactics. Such evasion was discovered during the intelligence investigation of the Directorate of VAT Audit, Intelligence and Investigation. There are also allegations of extreme non-cooperation in the investigation.
An investigation report has been submitted to the National Board of Revenue (NBR) after finding evidence of irregularities through step-by-step verification of documents from import to production. Which is now under review. A senior official of NBR told that the claim form may be issued soon from the large taxpayer unit.
Dhaka Tobacco located in Tongi, Gazipur manufactures Navy, Sheikh, Malboro, Navy Blue, Five Star and Gold Mine cigarettes. It supplies three to four thousand crores of Shalaka cigarettes to the local market annually. The company even exports. The subsidiary of Akiz Group of Industries was recently sold to Japan Tobacco (JT) Group. However, while the data of duty-VAT evasion is in Akiz Group. Therefore, it is said that the evasion money discovered by the VAT detectives will have to be paid to Dhaka Tobacco i.e.Akiz Group.
The managing director of Akiz Group, Bashir Uddin, was contacted by over the phone. But no reply was received from him.
However, AGM Ruhul Amin of the group’s tax and VAT department told that the main disagreement is over the demand for VAT and duty at the raw material level in cigarette production. Apart from our company, a huge amount of VAT was claimed from another company. It has been resolved.
Even if the VAT detectives demand a large amount of VAT from us, they will not get that much money. We have also objected to the NBR Chairman in this regard. The matter is under resolution. I hope it will be settled very soon.
Director General of VAT Audit, Intelligence and Investigation Department, Abdur Rauf when asked about the matter, he said that the investigation is ongoing. He did not agree to give any statement in this regard.
However, a senior NBR official told that Dhaka Tobacco Industries is a large cigarette manufacturing company. Tobacco is the main ingredient in cigarette production. In addition, several raw materials are used. Cigarettes are subject to supplementary duty, health care surcharge, income tax and VAT. The amount of revenue evasion uncovered in the investigation may be less or more. Our intelligence team took a lot of time to prepare the report. There we found that the company deliberately did not file the documents. Not only that, they also tried to mislead the VAT detectives with various tricks. The NBR therefore feels that the institution’s disrespect for the law and willful procrastination prove that there has been a major evasion. We are taking legal action.
How customs-VAT evasion info revealed
In view of the specific complaints, the Directorate of VAT Audit, Intelligence and Investigation decided to audit the activities related to VAT of Dhaka Tobacco Industries on June 8, 2017. An eight-member team headed by an Assistant Director was formed for that purpose. However, the company did not provide documents to the team at the initial stage. The investigation team had to send nine letters successively to get the records. Not only that, an irregularity case was also filed against the institution for not submitting the documents. Later, when Dhaka Tobacco provided some documents, the team prepared the initial audit report. But when the concerned institutions objected, a review committee was formed. The committee also issued multiple letters for submission of various documents. There too, evidence of non-cooperation has been found against Dhaka Tobacco Industries in various ways, including not providing documents.
Later, the issue of revenue evasion came to the fore by verifying the relevant documents including the company’s account statement, VAT document and annual report of the CA firm. The team assesses non-payment of revenue. While looking for the reason for the delay in providing the documents, the issue of Dhaka Tobacco Industries being sold and transfer of ownership came to the attention. In other words, the authorities concerned were deliberately delaying the submission of audit documents to hide the evidence of revenue evasion – it seemed to the VAT detectives.
A review of the company’s declaration found that tobacco leaf, acetate pe, cigarette paper, tipping paper, adhesive, aluminum foil, glycerine, carton, plug wrap/white beige paper, BOPP, chemicals, shell and slide are used for cigarette production. The team takes into account the lowest priced cigarettes in the calculation of Dhaka Tobacco’s revenue avoidance. In view of the organization’s application, on November 8, 2022, the software of the head office of Dhaka Tobacco Industries, Akiz Bhavan, was verified on the ground, but some information stored in the computer was found. But they were not able to show any information stored by the server. It is also alleged that the higher authorities of the company did not cooperate for a long time and tried to mislead by providing different information at the last stage.
2 teams of VAT detectives found
Discovery of first team
On June 8, 2017, the first eight-member audit committee or team was formed under the leadership of an Assistant Director of the Directorate of VAT Audit, Intelligence and Investigation. The team verified the company’s purchase account book, sales account book, submission (VAT-19), current account book, annual audit report and filed statement of accounts etc. as per the existing regulations of the VAT Act from July 2014 to 2018. Tk 9646.84 crore for customs and Tk 2,598.48 crore for VAT are estimated. Tk 10,720.64 crore for interest and Tk 153.95 crore avoided for health development surcharge. A total of Tk 23,119.92 croreswas evaded. But as Dhaka Tobacco Industries objected to the preliminary audit report, a re-verification team was formed.
Findings of re-verification team
Taking into consideration the objections of Dhaka Tobacco Industries, a second team of five members was formed under the leadership of a Deputy Director. The re-verification committee or team first review the preliminary audit report, documents submitted by the organization, documents collected from various sources (eg, banks, concerned commissionerate), statements of the organization etc. and the unpaid or evaded supplementary duty from FY 2014-15 to 2017-18. Tk 8,280.18 crore, VAT Tk 2,343.86 crore, health development surcharge Tk 142.73 crore, crude source VAT Tk 24.47 crore get information In total, the committee revealed the information of revenue evasion of Tk 10,791.24 crore. Interest is payable from the later date till the date of payment as per Section 37 (3) of the Value Added Tax Act, 1991.
Final investigation of revenue evasion
The special intelligence team of the Directorate of VAT Audit, Intelligence and Investigation prepared the final account after six long years of document manipulation and verification of objections. After submitting the report to the director general of the department on April 12 this year, it was sent to the National Board of Revenue (NBR) for collection of duty and VAT. Later, the NBR chairman directed a member of the organization to investigate the matter further. The investigation is said to be ongoing.
Analyzing the intelligence report, it has been found that Dhaka Tobacco Industries has evaded Tk 1,166.34 crore in supplementary duty in 2014-15 financial year from raw material to final production. Then 2015-16, 2016-17 and 2017-18 2015-16, 2016-17 and 2017-18 evasion of Tk 2064.17 crore, Tk 3,408.68 crore and Tk 1,640.94 crore respectively, or the calculation of gross revenue is available in the report. Information about evasion of Tk 8,280.18 crore was revealed regarding the total supplementary duty.
On the other hand, VAT on various raw materials including tobacco used in cigarette production is Tk 202.85 crore in 2014-15 financial year, Tk 645.32 crore in 2015-16 financial year, Tk 122.61 crore in 2016-17 financial year. And in the fiscal year 2017-18, Tk 473.35 crores have been evaded regarding VAT. In total, Tk 2,343.86 crore is received in unpaid form for VAT on tobacco use.
An evasion of Tk 142.73 crore has been discovered regarding health development surcharge. Out of which Tk 43.35 crore, Tk 68.17 crore, Tk 31.55 crore as surcharge due or unpaid in 2014-15, 2015-16, 2016-17 and 2017-18 respectively,evidence found.
Apart from this, the information of Tk 24.47 crore has been found regarding VAT in crude sources. In total, the committee revealed the information of revenue evasion of Tk 10,791.24 crore regarding duty, VAT and surcharge.
According to various sources, Dhaka Tobacco Industries is located in Tongi, Gazipur. The private limited company was originally owned by Akiz Group of Industries. One and a half thousand officers and employees are working in the company. The company exports cigarettes and tobacco. Japan Tobacco (JT) Group, one of the world’s five largest tobacco companies, bought Akiz Group’s entire cigarette manufacturing business for Tk 12,430 crore ($147.6 million) in 2018. It was the single largest foreign investment in Bangladesh’s private sector. Japan Tobacco currently sells a few brands of cigarettes including LD, Navy, Sheikh, K2, Real in the country’s market.
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