UK Diplomats Lobbying for BAT: Bangladesh

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Since the Framework Convention on Tobacco Control (FCTC) came into force in 2005, obliging parties to “limit contact with the tobacco industry”,[1] there have been several instances of direct lobbying by senior British government officials and diplomats in Bangladesh on behalf of British American Tobacco Bangladesh (BATB).

This is despite UK government rules of engagement for overseas civil servants with the tobacco industry, which emphasise the need for transparency in all dealings with the industry.[2]

Background: Alleged Unpaid Tax and Court Orders

In August 2017, Bangladesh journalist network the Anti Tobacco Media Alliance (ATMA) revealed that the British High Commissioner in Bangladesh Alison Blake had lobbied on behalf of BATB in a tax dispute with the Bangladesh Board of Revenue (NBR).[3] According to ATMA, BAT owed the NBR unpaid Value Added Tax (VAT) originally worth TK 1,924 crore, equivalent to over £170 million.

In November 2013 BATB had been served a retrospective tax demand for underpayment of VAT on high grade cigarettes which, according to the Bangladesh government's Large Taxpayers Unit, had been incorrectly categorised as low grade by BATB.[4]

BATB refused to pay, arguing discrimination, and in May 2014 were subject to an order from the Bangladesh High Court order to do so. Despite BATB submitting two petitions against the Bangladesh government in 2015,[5] a ruling in the High Court in March 2016 upheld the original judgement and BATB was ordered to pay the outstanding sum within 30 days.[6]

BATB appealed against the High Court judgement before the Appellate Division of the Supreme Court, the highest level of the Bangladesh Courts, which ruled on 25 July 2018 that BATB did not need to pay back the money.[7]

NBR Chair Former Independent Director BATB

In January 2018, Md. Mosharraf Hossain Bhuiyan became NBR’s new Chairman.[8] Bhuiyan has served as an independent Director of BATB from November 2014 to January 2018.[9][10] There is no evidence to suggest that Bhuiyan’s appointment is related to the Supreme Court’s ruling.

Lobbying Revealed

An article in British newspaper The Guardian which raised the issue of the undisclosed lobbying by the High Commissioner,[11] led to questions in the UK Parliament,[12][13] and Freedom Of Information (FOI) requests submitted by British health charity Action on Smoking and Health (ASH). This led to further disclosures of multiple meetings, e-mails and phone calls on the tax issue between BATB and British officials, including the Director and the Deputy Director of the Department of International Trade (DIT) in Dhaka and High Commissioner Blake.[14][15]

In February 2015, the first recorded contact between BAT and diplomats, BAT “updated [the] DIT Director on a tax demand” who suggested that the EU Business Council could discuss this issue with the Bangladesh Government in relation to “trade barriers” (a statement echoed later, see section on 'political justification'). There was a further e-mail “update” between the parties in June 2015.

After their 2015 legal petitions failed, BATB met Blake and the Director of DIT on 14 April 2016, less than 6 weeks after the High Court ruling and around the time the tax payment was due, and the DIT Director again in August that year.[15] BATB filed two appeals with the Supreme Court of Bangladesh in 2016.[16]

On 6 August 2017 Blake wrote a letter to the Bangladeshi government on behalf of BATB, which The Guardian reported as an attempt to help “a British company avoid paying tax to one of the world’s poorest countries”.[11] This was shortly after a meeting between BATB and the High Commissioner at an “external dinner” on 2 August, an e-mail and phone conversation between BATB and the Director of DIT on 3 August, and the same day as a further e-mail exchange between BATB and the Deputy Director on 6 August.[15] There are no details in the FOI release as to who instigated contact on each occasion or where the meeting took place. Neither has the specific content of any of the communications between BATB and British officials been disclosed; all are subject to FOI exemptions under section 43 (which relates to “commercial interests”[17]). Each entry simply states that BATB “updated” British officials on the tax dispute.[15]

Significantly, while the meeting, phone call and e-mails that preceded it were disclosed, the letter from Blake to the Bangladeshi government was not listed as a form of assistance to BATB at the time, or subsequently in the FOI release, even after it had been revealed by the UK media.[11] This is in breach of the requirement for transparency in both the FCTC and UK government guidelines.

Political Justification

Although the full text of the letter has not been published, The Guardian reported that Blake justified her direct intervention using BATB’s argument that there was “no scope to hold the manufacturer liable to pay VAT on a retrospective basis”, and that she urged an out of court resolution of the matter.[11] The UK Minister of State for the FCO (Lord Ahmad of Wimbledon) argued that the demands from the Bangladeshi government were “discriminatory” against BATB.[13] Neither Blake nor the Minister provided evidence of discrimination beyond reference to divergent views in the Bangleshi administration.

British politicians reiterated this ‘discrimination’ argument in 2018: “The Government has standing instructions to all diplomatic staff to follow the revised December 2013 guidelines on interactions with tobacco companies. In line with this guidance, assistance may be offered to counter discriminatory practices". Contrary to transparency requirements they also stated that "The Government does not catalogue the representations it makes on behalf of companies”.[18][19]

Cost to Bangladesh

Blake stated in her letter that BATB had a “proud history of more than 105 years of investment and revenue contribution in Bangladesh”.[11] Yet according to The Independent newspaper in Bangladesh, four companies (BATB and three telecoms firms) together account for over 70% of the Tk 7,170 crore (over £800 million) in outstanding tax and VAT payments.[4]

The Bangladesh Attorney General Mahbubey Alam has said that “These multinational companies are depriving us in many ways including not paying tax properly. They are filing cases one after another to avoid paying the unpaid tax”.[4]

PROGGA, a local NGO which promotes transparency around tobacco, notes that the Bangladeshi government spends over £440 million on treating tobacco related illnesses, but receives less than half that in tax revenue from tobacco, leading to a net loss of around £230 million.[20]

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Relevant Link

Notes

  1. ↑ World Health Organization, Guidelines for implementation of Article 5.3. of the WHO Framework Convention on Tobacco Control, 2008, accessed June 2018
  2. ↑ Department of Health, United Kingdom’s revised guidelines for overseas posts on support to the tobacco industry, December 2013, accessed June 2018
  3. ↑ PROGGA, BATB deploys British High Commissioner to negotiate tax evasion battle worth Tk. 1924bn-ATMA member exposed, Tobacco Industry Watch BD website, undated, accessed July 2018
  4. ↑ 4.0 4.1 4.2 M. Yeasin, Revenue caught in legal web, The Independent, 20 May 2018, accessed June 2018
  5. ↑ British American Tobacco Bangladesh, Writ petition no. 2849/2015 and 2848/2015, Bangladesh Supreme Court (High Court Division), 2015
  6. ↑ Bangladesh Supreme Court (High Court Division), 6th March 2016, available from: http://www.supremecourt.gov.bd/, accessed June 2018
  7. ↑ M. Yeasin, BATB need not pay TK 1,924 crore to NBR, The Independent , 19 August 2018, accessed August 2018
  8. ↑ National Board of Revenue, Chairman’s Profile, 2018, accessed August 2018
  9. ↑ Mosharraf Hossain Bhuiyan becomes new NBR chief, The Financial Express, 4 January 2018, accessed August 2018
  10. ↑ British American Tobacco Bangladesh, Directors’ Report 2017, 5 March 2018, accessed August 2018
  11. ↑ 11.0 11.1 11.2 11.3 11.4 J. Doward, British diplomat lobbied on behalf of big tobacco, The Guardian, 10 September 2017, accessed June 2018
  12. ↑ House of Commons, Diplomatic Service: Tobacco: Written question 105761, UK Parliament website, 6 October 2017, accessed June 2018
  13. ↑ 13.0 13.1 House of Lords Hansard, British American Tobacco debate, 17 October 2017, accessed June 2018
  14. ↑ J. Doward, UK accused of hypocrisy on overseas tobacco control, The Guardian, 27 January 2018, accessed June 2018
  15. ↑ 15.0 15.1 15.2 15.3 Department of International Trade, FOI 1042-17, 29 December 2017
  16. ↑ British American Tobacco Bangladesh, Appeal no. C.P. 1200/2016 and C.P. 1201/2016, Bangladesh Supreme Court (Appellate Division), 2016
  17. ↑ UK Government Freedom of Informatiom Act 2000 Section 43, legislation.gov.uk, undated, accessed July 2018
  18. ↑ House of Lords, Tobacco: Written question HL5324, UK Parliament website, 1 February 2018, accessed June 2018
  19. ↑ House of Commons, Tobacco: Written question 127795, UK Parliament website, 8 February 2018, accessed June 2018
  20. ↑ PROGGA, Tobacco Control, PROGGA website, undated, accessed June 2018
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