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DHAKA, Bangladesh – By government accounts, four foreign-backed cellphone operators owe $500 million to Bangladesh in unpaid taxes. By the companies' accounts, the figure is closer to $50 million — if it isn't zero.
As the legal row drags into its fourth year without resolution, telecommunications analysts warn it is putting pressure on the industry that is Bangladesh's single largest source of revenue, providing $1.43 billion in tax revenues in 2015.
Government regulators say the companies broke the law by selling old SIM cards without properly notifying regulators, and then failed to pay taxes on those sales from July 2009 and December 2011. They also allege the companies concealed customer information to obscure the issue, according to government legal documents on the case.
The four companies — Norwegian Telenor's subsidiary Grameen Phone; Egypt's Orascom Telecom's Banglalink; Robi, the Malaysian-Japanese joint venture Robi Axiata Ltd.; and India's Bharti Airtel's subsidiary Airtel — have rejected the government's demands, taking the claim to the tax appellate tribunal.
Both the government and its tax authority refused comment while the case is still under court review.
Industry experts say the standoff may alienate companies and spook investors in this country of 160 million people. British-based Vodafone is facing a similar case in India, where authorities want $2.5 billion in back taxes from an asset purchase done before Indian legislation in 2012 made such deals subject to taxation.
Most of the 128 million mobile-phone subscribers in Bangladesh are customers of one of the four private companies involved in the tax dispute.
"The government must think of the issue from the point of view that this is the largest foreign investment sector in the country," said T.I.M. Nurul Kabir, who heads the Association of Mobile Telecom Operators of Bangladesh lobbying consortium. "The industry is suffering for this dispute."
Telecoms companies and their investors are growing more cautious about building a rural cellphone network, said Abu Saeed Khan, a Bangladeshi telecommunication expert who works as a senior policy fellow of the Colombo-based LIRNEasia think tank.
"Business confidence is feeling the pinch," he said.
Khan said Asian regulators don't understand how to effectively tax telecoms companies, and end up going back for more later. In Bangladesh, "the dispute involves some grey areas from the regulators' side ... and operators used these grey areas for their own benefit."
The case erupted in 2012, when the government handed the four foreign-backed subsidiaries the bill for back taxes totaling about $500 million combined. The taxes come from VAT charges of 100 Bangladeshi taka, or about $1.28, that customers pay when buying either an old or a new SIM card, though selling old cards technically became legal only in May 2015 when the telecom regulator issued guidelines for such sales.
The government says the telecoms providers neglected to pay VAT taxes on old SIMS cards they sold long before such sales were illegal.
The companies do not deny selling old SIMs, but say the practice was not illegal. They also contend the total amount due from any tax anomalies would not exceed 10 percent of the government's claim.
The $50 million court deposit required to take the case to the tax appellate court tied up company financing and was "a big burden for us," said Taimur Rahman, chief corporate and regulatory affairs officer of Banglalink, which claims a 25 percent market share and posted $158 million in revenues in the second-quarter of this year.
The case has dragged on, stuck in Bangladesh's painfully slow judicial system. In 2012, the tax court forwarded the issue to the revenue department for negotiation and settlement.
For a year, nothing happened.
Regulators are expected to float an auction for the 4G spectrum by the end of this year. In 2013, the companies threatened to boycott the country's 3G spectrum auction unless the tax issue was resolved, prompting the government to form a dispute resolution panel.
But three years later, nothing's been resolved. Regulators meet regularly with the telecoms association, but neither side has yielded. Meanwhile, the court has postponed hearings and urged the revenue department to resolve the dispute, to no avail.
"We are still open to discuss and find an amicable solution," said Rahman of Banglalink. "We want to focus on providing better and affordable service to our subscribers, rather than fighting in court."
Both sides are now saying the issue needs to go back to a court.
"If the court gives us any direction on the issue, we will just follow that," said Sarwar Alam, secretary of the Bangladesh Telecommunication Regulatory Commission.