Summit Group accused of Tk 1,112cr tax evasion

The National Board of Revenue has alleged that two entities under  Summit Group failed to deduct taxes at source on dividend payments, resulting in about Tk 1,112 crore in unpaid taxes.

Summit Corporation Limited, one of the country's largest conglomerates, is accused of not deducting the mandatory 15 percent tax at source when it paid dividends to Summit Power International, a Singapore-based company and its parent entity.

Additionally, Summit Power Limited allegedly failed to withhold the required tax on dividends paid to Summit Corporation Limited, which holds a majority stake in the company.

Summit Group has refuted the allegations, asserting its commitment to legal compliance.

The Central Intelligence Cell (CIC) of the NBR conducted a probe into the tax practices of Summit Group as part of a broader examination of industrial giants, including Bashundhara Group, Beximco, Nassa Group, Orion Group and S Alam Group, and Third Wave Technologies (Nagad).

The investigations were launched following the installation of an interim government in August.

"This is one of the largest tax deduction at source (TDS) cases we've encountered," said a senior CIC official. The probe, which spanned over six weeks, involved an extensive review of shareholdings, dividend declarations, and payment records of Summit Power Limited.

Summit Power, with a paid-up capital of Tk 1,067 crore, has a diverse shareholder base, including Summit Corporation (63.19 percent), Euro Hub Investments Limited (3.65 percent), institutional investors (18.52 percent), and public investors (14.64 percent).

Under Section 117 of the Income Tax Act, companies registered in Bangladesh are required to deduct taxes at source on dividend payments. However, investigators found that Summit Power failed to comply with this obligation for dividends paid to Summit Corporation.

The CIC's review of financial statements from FY2018 to FY2024 revealed that Summit Power did not deduct Tk 318.34 crore in taxes on dividends paid to Summit Corporation. With penalties included, the total amount of unpaid taxes has increased to Tk 465.07 crore.

The investigation also found similar non-compliance when Summit Corporation paid dividends to Summit Power International.

The agency alleged that Summit Corporation failed to deduct Tk 437.65 crore in taxes when distributing dividends to its main shareholder, Summit International, which owns a 99.99 percent stake in Summit Corporation. With penalties included, the total unpaid taxes amount to Tk 647.73 crore.

Consequently, the two entities' total unpaid taxes amounted to Tk 1,112.8 crore, according to the NBR.

"We have yet to receive any information from NBR or any tax authorities. Summit has never evaded any tax. Upon receipt of any letter from NBR or tax authorities, we will do whatever is required to be done as per the laws of Bangladesh. We always did and shall always abide by the laws," Summit said in a statement.

The statement says the NBR provided "wrong clarification" to Summit in 2023. "We acted on NBR clarification as such the question of "evasion" does not arise," Summit said.

The case has been handed over to Tax Zone-2 for further action. "We have shared our findings with the relevant tax zone, which has already sent letters to Summit Group," said the CIC official.