File photo: Muhammad Yunus

The government will take legal action against Nobel laureate Muhammad Yunus and eight of his associated organisations for alleged irregularities in tax exemption, a top official has said.

The decision was made yesterday at a cabinet meeting, chaired by Prime Minister Sheikh Hasina, after the National Board of Revenue submitted a report to the cabinet following its year-long probe on the tax-free benefits enjoyed by Yunus and the eight organisations.

"The NBR will take steps on issues relating to tax and tax exemption. The banking division and Bangladesh Bank will also initiate measures on matters that concern them," cabinet Secretary Musharraf Hossain Bhuiyan told reporters after the meeting at the secretariat.

"If needed, they will take help from the law ministry for any legal explanation or opinion."

The NBR could not come up with any evidence that the Grameen Bank founder as a wage earner had obtained tax exemption facility illegally on his income from foreign sources.

In the report, the tax authority didn't clearly explain how Yunus and eight of his associated organisations had committed the irregularities in taking tax exemption facility.

It, however, raised questions that the Nobel laureate didn't take permission from the government before receiving the money as a “public servant” in honoraria, awards and royalties from foreign sources between 2004 and 2011.

Musharraf said the cabinet division didn't say whether any lawsuit would be filed against the microcredit pioneer or the associated organisations.

"The cabinet only said legal steps would be taken over the irregularities."

Later, Finance Minister AMA Muhith said Prof Yunus had taken advantage of wage earners' benefits on tax-free money.

“It is permissible by law, but he has violated the law as he had never sought any permission from this government."

The minister said companies owned by Yunus, not by Grameen Bank, had obtained tax benefits in the name of Grameen.

Muhith said, “The NBR will ask them to pay income tax because they are not entitled to any tax exemption."

Asked whether the central bank will take any action against Yunus, the minister said Grameen Bank provided Yunus with many bank guarantees, and Bangladesh Bank has to see whether those guarantees were regular.

But it seems the central bank doesn't have enough ground to take action against Yunus, said the minister.

Meanwhile, the NBR made the report public in the afternoon in line with a cabinet decision.

The NBR looked into Yunus' foreign income as wage earner and the tax exemption he obtained between 2004 and 2011.

Talking to reporters yesterday, NBR Chairman Md Ghulam Hussain said: "The NBR will seek explanations from Grameen Bank about the tax irregularities."

"The NBR will also look into the transfer of funds from Grameen Bank to Grameen Kalyan and take action on the basis of its findings," he said.

Asked whether Prof Yunus was a public servant, the finance minister said, “Yes. He was managing director of a statutory body."

But the Nobel laureate and his Yunus Centre have refuted the claims many times. They maintain that no Grameen Bank employees, including the MD, take salaries or allowances from the government budget.

At yesterday's press briefing, reporters wanted to know why the NBR had not said anything when Yunus took the tax-exemption opportunity.

In support of the NBR, Muhith said: "The NBR assumed that Yunus, being such a respected person, had perhaps taken permission for the claims he made. So, the NBR did not ask him about it."

The minister could not say immediately whether there was any possibility of filing lawsuits against Yunus.

"I do not know. Perhaps the NBR will issue a notice and ask him [Prof Yunus] to show proof that he had taken permission from the government. It is actually the NBR's business."

Muhith said Yunus never took any permission from the government during his tenure as the bank's managing director.

"The government also has its own faults because the government-appointed chairmen and directors did not exercise their supervision."

Muhith said the present government raised the question following the broadcast of a documentary on Norwegian television in 2010.

"We did this because of the demand and the hue and cry made by the media at the time. We came to power in 2009, but we did nothing in 2009 and 2010."

Muhith couldn't say whether the NBR would ask the microcredit pioneer to return the Tk 12.65 crore he took as tax exemption on his foreign income between 2004 and 2011.

The NBR will take steps in line with the law, said the minister.

The report said the banker to the poor also didn't have the government's consent for accepting awards and money.

The cabinet secretary said the NBR had also looked into some non-tax issues during its investigation.

In the report, the NBR mentioned that the transfer of funds from Grameen Bank to Grameen Kalyan and then again to Grameen Bank was not made in line with laws, he said.

The NBR checked income tax documents of 13 associated organisations of Grameen Bank. Of them, eight organisations -- Grameen Fisheries and Animal Husbandry Foundation, Grameen Danone Foods, Grameen Capital Management Ltd, Grameen Communications, Grameen Shakti, Grameen Udyog, Grameen Trust and Grameen Kalyan -- had allegedly taken income tax facilities illegally.

Meanwhile, Yunus Centre said Yunus didn't breach any laws during his stint as Grameen Bank's managing director, and all of his activities were approved by the bank's board.

"Grameen Bank has been created by a special law. The board of directors holds absolute power under the law. Whatever Prof Yunus did he did with the permission and consent of this powerful board," it said.

"He has not violated any laws," said the centre.

The statement from the secretariat of the microcredit pioneer came several hours after the NBR made the report public.

The Centre said Yunus' earnings from foreign sources include royalties from his books, speeches at conferences, and the awards he received for his contribution to the elimination of poverty across the world.

"He can show this income as tax-free under the existing laws if the income is remitted to the country through formal banking channels.

"Prof Yunus has always remitted his foreign incomes through proper banking channels and has shown his domestic and foreign incomes in his income tax returns every year."

"He paid taxes whenever it was required," said the statement.

It is the responsibility of the tax authority to determine which income is tax-free and which is not, said the Centre.

"The tax authority never raised any questions about his tax record. It also never issued any letter or notice to him."

Prof Yunus was not a public servant after 2000 according to the verdict of the Supreme Court, it said.

"If he was not a public servant after 2000, no approval from the government was necessary to accept foreign incomes and awards."

"And here the law which is applicable to a private citizen will also be applicable to him. If that is the case, the NBR's accusations are baseless," said the statement.