The Chinese company has had business transactions worth $500 million with different entities in the country over the last few years
The National Board of Revenue (NBR) has launched an investigation into ZTE Bangladesh – a subsidiary of the Chinese ZTE Corporation that has many business operations in different sectors of the country – to see if the company is involved in tax evasion.
As part of the investigation, the revenue board has already sent separate letters to different entities with whom it has its business deals.
With the aim of protecting the property safety of Bangladesh and upholding local laws and regulations, the revenue authority has launched the probe as the company's operation is deemed to have an intention of tax evasion, a revenue official said.
The senior official of the NBR, who wished not to be named, confirmed to The Business Standard about the news of sending several letters to entities that are doing business with the ZTE. "We will check bank transactions of all related parties," he said.
The ZTE Corporation is a Chinese major international provider of advanced telecommunications systems, mobile devices and enterprise technology solutions to consumers, operators, companies and public sector customers.
Listed on the stock exchanges of Hong Kong and Shenzhen, ZTE sells its products and services in more than 160 countries.
According to the Shenzhen Stock Exchange, the total revenue of the ZTE Corporation in 2019 was 9,073 crore Chinese Yuan.
Currently, it has both equipment and service contracts with the public and private ICT and Telecom and the power sector in Bangladesh.
According to the office of the Deputy Commissioner of Taxes, the company has had business transactions worth $500 million with different entities in the country over the last few years.
A senior NBR official told The Business Standard, obviously, the proportion of onshore service is high and is signed and delivered by the local Bangladeshi company, and the revenue and taxes should be attributed to the registered local company.
If the turnkey contract is actually signed by a Chinese incorporated company, the contractor will definitely arrange personal and technical teams to support the service implementation, he added.
The Chinese ZTE Corporation is operating businesses in Bangladesh through its subsidiary, he mentioned, adding that in this case the company can evade tax in two ways -- transfer pricing and making transactions with related parties from China.
The NBR is investigating whether the company is involved with such practices.
The country's first national data centre (NDC), which is located in the Kaliakoir hi-tech park, about 60 kilometres away from the centre of Dhaka, also has been constructed by this Chinese Tech Company.
Among private sector ZTE has a large business operation with Robi, is the second largest mobile operator of Bangladesh. Robi takes network expansion equipment and telecom services from ZTE.
However, Robi did not disclose the information on how many projects it has engaged the Chinese tech company and the volume of the projects' cost and whether it incorporates the TAX in the bills.
Approached for its statement on this issue, Robi told The Business Standard, "Our relationship with our partner organisations form the core of our business strength. Just like any sensible company, we are not comfortable to divulge such information that will undermine our competitive edge in the market."
The National Board of Revenue also issued a letter to the state-owned Teletalk Company Limited.
When contacted, Targhibul Islam, deputy general manager at Teletalk could not say in how many projects currently it has engaged the ZTE Corporation and whether it is incorporating tax in the bills or not.
The Bangladesh Telecommunications Company Ltd (BTCL) and Power Grid Company of Bangladesh (PGCB) are the major service receivers of the ZTE Corporation.
The NBR also sent separate letters to both the organisations to send related information concerning ZTE.
The revenue authority said it has decided to investigate the value of transactions between foreign firms and their associated enterprises and find out trade-based money laundering through misuse of the transfer pricing system.
In this regard, NBR has formed an investigation team for the ZTE and other multinational companies (MNCs) operating in Bangladesh.
An official said MNCs may engage in under-invoicing or over-invoicing practices while transferring prices to its associated companies located in other countries for purchasing goods and services to either reduce the level of payable duties and other taxes or siphon off money from the importing country.
The Business Standard contacted ZTE Bangladesh for its statement on the issue. However, the company has sought time to make an official statement.
Nonetheless, officials of the company unofficially told TBS that the company is filing tax returns to the NBR on a regular basis and doing business following the laws of the country.
Terming the serving of letters by the NBR a regular activity of the revenue board, they also said that they are cooperating with the NBR in the investigation process.