BD-Tata talks likely to collapse: $2.5bn investment
By Our Correspondent
DHAKA, Oct 3: The latest round of negotiations between the government of Bangladesh and the Tata Group of India regarding the latter’s proposed $2.5 billion investment here was precariously poised on Monday, as the Indian conglomerate threw a spanner in the works with a fresh set of demands.
The National Board of Revenue officials, who met with Tata representatives on Monday as part of the ongoing negotiations, termed Tata’s demands regarding tax related incentives as “ambitious, unrealistic and unimplementable”.
The finance and planning minister, M Saifur Rahman, has also termed Tata’s demands unimplementable and asked the NBR officials to act in the spirit of upholding national interest, NBR sources said.
The major new demands include assurances from the government that it would not introduce any new taxes, duties, levies, charges or any kind of fees on Tata’s investment during the period of its operation in the country.
Tata demanded ‘deemed export’ status for steel, coal and urea sold locally in Bangladesh, exemption from local sales taxes, value added tax and other duties, and EPZ status for steel, coal and urea projects.
It demanded complete waiver from stamp duty, registration charges, and capital gains tax on purchase of land, and wants all exploration, development and other pre-production expenses to be treated as loss and allowed to be carried forward indefinitely.
Furthermore, it sought administrative permission for borrowing foreign currency, allowing the same to be retained in overseas accounts and utilized for project-related purposes, and allowing retaining overseas capital and earnings from sales outside Bangladesh.
Besides, the new demands include availing insurance directly from off-shore agencies, premium on redemption of preference shares to be treated as capital gains, and permission for full repatriation of profits and capital as per project needs.
It also demanded tax to be imposed only on profits to be derived from 75 per cent of its total investment after the expiry of the tax holiday period.
The directive from Saifur came following a group of NBR officials, led by SM Zahir Muhammed, member (tax policy), met the minister at his finance ministry office after holding a meeting with Tata officials.
The revenue men handed over to the minister the fresh demands of the Indian conglomerate and sought policy decisions from Saifur, the sources said.
Energy adviser and executive chairman of the Board of Investment Mahmudur Rahman, and communication secretary Shafiqur Rahman, who is also convener of the team negotiating with Tata, were present at the meeting with Saifur.
“We cannot sacrifice much on fiscal matters keeping in view the national interests on the one hand and level-playing field between all existing foreign investors and investors to come in the future on the other,” the chairman of the country’s Board of Investment told local press. “We can of course consider Tata’s demands on low-priced land or large areas of land to set up their proposed industries taking into account such big investment.”
Top revenue officials concerned told the press that the government is not in a position to formulate or enact separate regulations for specific investing companies.
Tata on Monday also placed their previous demands along with the fresh ones. Tata had earlier put the government in a quandary with a list of demands they made in July that can only be met through either violation of existing rules or enactment of new ones, sources in the government said.
The list sought complete tax and duty exemption on its profit, remuneration and imports before any agreement on the proposed $2.5 billion investment in Bangladesh.
The Indian conglomerate has demanded 100 per cent income tax exemption for its power, fertilizer, steel and coalmine projects for a period of 10 years from the date of commercial production. It also sought waiver on duties on raw material and capital machinery import for the projects.
The existing regulations allow waiver on import duties only for 100 per cent export-oriented industries and capital machinery for power generation projects that have power purchase agreement with the government.
While none of the proposed Tata projects is 100 per cent export-oriented, the current regulations do not also allow tax exemptions beyond a period of six years, said the sources.
