Inequality deepens on unfair tax treaties

ActionAid says Bangladesh has 18 restrictive tax treaties that curb govt's power to tax global firms

Star Business Report

Bangladesh's inability to levy withholding taxes on dividends paid to overseas shareholders is costing the country millions of dollars a year in lost revenues, ActionAid said in a report.
The clause is one of the total 18 very restrictive tax treaties that hamper the government's power to tax global companies doing business in Bangladesh, unfairly limiting the collection of tax revenue, said the international non-governmental organisation.
Bangladesh has the highest number of very restrictive treaties with wealthier countries in the ActionAid tax treaty dataset.
Thirty countries have negotiated dividend tax breaks for direct investment in treaties with Bangladesh, each making small savings for its multinationals.
ActionAid estimates that these small cuts add up to $85 million given away by Bangladesh in 2013 alone, due to a single rule in the country's tax treaties.
“We estimate, for example, that restrictions on Bangladesh's ability to levy withholding taxes on dividend payments result in a revenue loss of $85 million annually.”
This is especially striking as the country has 66 million people living in extreme poverty, or on less than $1.9 a day, said the report.
“With an annual total health expenditure of approximately $25 per capita, remedying this alone could pay for health services for 3.4 million people,” the Johannesburg-based organisation said in its report styled “Mistreated”.
It is part of a global phenomenon which sees poorer countries losing billions in revenue because of the treaties that stop them taxing multinational companies.
The report is based on ground breaking research that for the first time examined more than 500 international tax treaties, revealing which ones affect the poorer countries' ability to raise taxes on multinational companies.
Treaties often ensure that corporate cash flows from poorer to richer countries untaxed, worsening global inequality and poverty, which imposes the highest costs on women and children in the form of lost funding for key public services like hospitals and schools.
“All national resources that can be mobilised behind the fight for development should be explored. Outdated and unfair treaties make it possible for multinational companies to potentially significantly reduce the tax they pay in lower income countries,” said Farah Kabir, country director of ActionAid Bangladesh.
Women and children in poverty pay the price when crumbling public services like schools and hospitals are starved of possible funding.
“It is time for our government to make tax fair and urgently revise very restrictive treaties that we have. Multinational companies should be paying their fair share in Bangladesh.”
Tax revenues collected by Bangladesh are among the smallest in the world in proportion to the size of its economy.
Many tax treaties make it possible for multinational companies operating in lower income countries to significantly reduce corporate tax by moving money out of the country through dividends, royalty or interest payments which are subject to low tax rates capped in tax treaties, the report said.
Tax treaties that lower income countries have signed with members of the Organisation for Economic Cooperation and Development, a club of rich countries, take away more taxing rights than those with non-OECD countries, and worryingly, the deals struck with OECD countries are getting worse, said the report.
The UK and Italy are tied as the countries that have entered into the highest number of very restrictive tax treaties with African and Asian countries since the 1970s, followed by Germany. China, Tunisia and Mauritius also have a rapidly growing number of very restrictive treaties with some of the world's poorest countries.
For many lower income countries, raising more revenue from taxing multinational companies could help fund lasting change by improving chronically underfunded schools and hospitals, it said.
ActionAid is calling on governments to reconsider the restrictive treaties to ensure multinational companies pay their fair share of tax in poorer countries.
The charity is also urging companies to increase transparency and publish details of lobbying activities relating to tax treaties

Coca-Cola empowering women economically

The company completes a project in Jamalpur

Officials of Coca-Cola pose at a programme to present the outcome of the first phase of its economic empowerment programme and launch its second phase, at Lakeshore Hotel in Dhaka yesterday. Coca-Cola

Star Business Report

COCA-COLA has successfully completed the first phase of its economic empowerment programme for women in remote char areas of Jamalpur in Bangladesh.
The company presented the outcome of the scheme, which was taken under a global initiative, and launched the second phase at a programme at Lakeshore Hotel in Dhaka yesterday.
The second phase will cover Khulna and Bagerhat districts. The global programme—5by20—seeks to economically empower five million women worldwide by 2020.
The initiative in Bangladesh is implemented by Concern Universal, a non-profit organisation, and it has trained women on modern technologies that are used in daily life.
The scheme was adapted into the Women Business Centre (WBC) programme in Bangladesh.
Concern Universal found in a survey that with the help of the training, women entrepreneurs were able to increase their production by 5 percent, reduce the cost of production by 5 percent and get better prices for their produce.
The programme, which was launched in 2015 with 10 WBCs, helped train 10,125 women on agricultural production, marketing services, mobile and computer services and basic healthcare last year.
The WBC project aims to address common barriers women face in the marketplace.
The project will provide women with the access to business skills training, market information, agriculture training and inputs, mobile banking assistance, healthcare inputs and counselling, mentoring and networking opportunities.
A group of five women entrepreneurs who run the WBCs in each village are provided with seed capital for setting up the centre and skill-based training.
“We want more than 100,000 women of Bangladesh to get training from this centres and change their lives by themselves,” said Sumanta Datta, vice president for operations and customer leadership at Coca-Cola.
He said their business will not be successful if the community is not made prosperous first.
In the ceremony, Coco-Cola handed over a crest to one of the top women entrepreneurs and honoured two others.
While visiting the Kendual union of Jamalpur district, senior regional officials of Coca-Cola expressed their satisfaction over the success rate of the empowerment programme, according to a statement.
New initiatives will be taken emulating the success of the Jamalpur project, said Ishteyaque Amjad, vice president for public affairs and communications at Coca-Cola. He said, with regard to workforce participation, Bangladeshi women are doing better than those in other South Asian countries.
However, women workers are continuously facing harder obstacles, from balancing work and family to accessing financing, often arising from a lack of training and confidence.
“In partnership with Concern Universal, we have tried to bank on the potential of disenfranchised women globally by providing relevant skills training to rural women through WBCs,” Amjad said.
“The success of the first phase tells us that we are ready and equipped to take on the challenge of the second phase.”
James Treasure-Evans, international programme and policy manager at Concern Universal, thanked Coca-Cola and said engaging corporations with the public and non-profit sectors to find common solutions to problems makes for a successful partnership.
He said they will spend a huge amount of money through Concern Universal in Bangladesh this year.
Senior officials of Coca-Cola Bangladesh and Concern Universal also spoke.

Agrani MD caught in irregularities

Star Business Report

The central bank has served notice on Agrani Bank Managing Director Syed Abdul Hamid for lending Tk 136.83 crore to a dubious company in Chittagong by violating a raft of rules.
The irregularities were unearthed during a Bangladesh Bank inspection at the state bank's Asadganj branch in Chittagong between January 10 and January 13 this year.
The branch had disbursed Tk 24.76 crore as cash credit and Tk 112.07 crore to settle liabilities of letters of credit in favour of Zaynab Trading without taking adequate mortgage.
The inspection team was told that Zaynab Trading gave mortgage of 185.50 decimals of land against the loans, when in reality only 33.59 decimals were furnished. The ownership is disputed too.
The office of Zaynab Trading was supposed to be located at Khatunganj in Chittagong, but the central bank inspection team could not find it.
The inspection team's report said Hamid was directly involved in the sanctioning and disbursement of the loans.
In another violation, the Agrani MD took the decision to shift the Asadganj branch to a building owned by the managing director of Zaynab Trading.
The managing directors are not allowed to take such decisions; the responsibility is vested to the board of directors.
Hamid also rescheduled loans of Zaynab Trading going above and beyond the permissible limit.
The report recommended stern actions against Hamid for the irregularities.
Subsequently, he was slapped with the show-cause notice last week and was asked to respond to it by March 3.
After receiving the response, the central bank will take actions as per the Banking Companies Act, said Anwarul Islam, a spokesperson for the BB.
Contacted, Zaid Bakht, chairman of Agrani Bank, said the notice has not been issued to him.
“Rather, it was issued to the managing director of the bank. So, he has to explain the issue to the central bank,” he added.
Hamid remained unavailable for comment.