Tullow to move to international court over tax dispute in Bangladesh
Hasan Azad || BusinessInsider
Photo: Collected
Multinational oil-gas company Tullow, operating in Bangladesh since 2001, is moving to an international court over Tk 309 crore tax disputes, after a legal battle in the Supreme Court against the National Board of Revenue (NBR) and state-owned company Petrobangla, officials familiar with the matter have said.
The Ireland-based company already sent a letter to the authorities concerned in this regard, in which it said it will file a petition at the International Centre for Settlement of Investment Disputes (ICSID) in Singapore soon over the issue.
Meanwhile, Bangladesh is also prepared for the legal battle at the ICSID, officials said.
“If Tullow finally goes to the international court, we will fight the legal battle,” Syed Ashfaquzzaman, secretary at the Petrobangla, told the Business Insider Bangladesh. “Tullow by itself created the problem, there is no issue from the Bangladesh side,” he added.
Earlier, the company filed a case with the NBR and then moved to the High Court and the Appellate Division of the Supreme Court over the tax amount demanded by a deputy commissioner of taxes.
All of them dismissed the company’s petitions after scrutinising the issues and asked it to pay the amount immediately.
The company believes the authorities concerned demanded the tax amount irrationally, that’s why it decided to go to the ICSID.
Earlier on June 14, Tullow-appointed consultancy firm Ashurt LLP sent a letter to State Minister for Power, Energy and Mineral Resources Nasrul Hamid over the tax dispute, and forwarded its carbon copies to PM’s Energy Advisor Dr Towfiq-e-Elahi, Law Minister Anisul Huq, Principal Secretary Dr Ahmad Kaikaus, and NBR Chairman Abu Hena Rahmatul Munim.
A day later, Tullow Bangladesh General Manager Edwin Bowles sent another letter to the law minister, mentioning almost the same speech – both sides have failed to settle the dispute amicably.
Later, officials at Petrobangla and the ministries concerned held a meeting with the PM’s adviser and decided to be prepared for any legal battle in future.
Tullow in the letters says it signed a production sharing contract (PSC) with Petrobangla for extracting fuel oil and gas from onshore block-9 on May 11, 2001. However, it went to production after FY2008. In the mentioned time, it invested a huge amount for oil and gas exploration and earned zero. Even after several years, it was in losses.
Meanwhile, the National Board of Revenue has been demanding over Tk 309 crore in tax from the company for years when it was in losses.
“If the issue is not settled with the negotiation, we will go to the ICSID following section 29 of the PSC,” it reads.
Tullow has also allegedly violated rules relating to filing of tax returns.
Petrobangla officials said the company was supposed to file tax returns through Petrobangla under the PSC section 18.8, but it submitted the tax returns from FY 2002-03 to FY 2008-09 without Petrobangla’s consent, which is a violation of the contract.
They said it mentioned zero income in the tax returns which was irrational for such a company before going for production. Instead, it needed to show exploration costs or losses on their tax files.
As a result, Tullow failed to reconcile $118 million exploration costs or losses in the next few years. Moreover, the authorities concerned determined tax for the company from FY2009, the Petrobangla secretary said.
After the dismissal of the petition from the Supreme Court, the tax authorities determined Tk 309.43 crore as tax and interest for the company for FY 2008 to FY 2013 and asked Tullow to pay it immediately.
Simultaneously, the NBR pressured Petrobangla to pay the amount on behalf of the company under the PSC sections 18.1, and 18.5.
Petrobangla says the company must pay the tax as per the PSC. But it did not pay heed to them and now says to go for international arbitration.