Misuse Of Transfer Pricing
NBR forms cell to stop capital flight by MNCs
After 18 months of incorporation of transfer pricing provision in the law, the National Board of Revenue has at last taken a move to make the provision operational as it has formed a cell to prevent tax evasion and capital flight mainly by multinational companies.
The revenue board on Wednesday formed a transfer pricing cell which will investigate and undertake audit of international transactions made by MNCs within associated enterprises to check capital flight from the country through misuse of transfer pricing system, officials of the NBR said.
They said that though transfer pricing was mainly relevant for MNCs, transactions of local companies within associated companies will also come under the purview of the cell, officials of the NBR said.
A high official of the revenue board told New Age that NBR could not make the provision functional which was incorporated in the Finance Bill-2012 due to various reasons including lack of experts and skilled manpower in the field.
After providing extensive trainings to some 50 revenue officials in last few months, the NBR has formed the cell with a set of responsibilities to check tax evasion through ensuring proper use of transfer pricing facility, he said.
NBR member (international taxes) Parvez Iqbal was made the head of the cell while Shabbir Ahmed, joint director of Central Intelligence Cell of the NBR was appointed as coordinator.
The revenue board will issue an office order early next week in this connection.
The NBR has also fixed a set of responsibilities for the cell, including conducting investigation to prevent capital flight through misuse of transfer pricing system.
It will also create and preserve a database of international transaction prices.
Officials of the NBR said that primarily the cell would appoint transfer pricing officials (TPO) and provide capacity building trainings to taxmen of income tax wing and stakeholders including officials of MNCs and local big companies.
After ensuring proper capacity building of taxmen, the cell will go to conduct audit of transactions of MNCs made under transfer pricing system, they said.
The cell will also maintain communication with tax authorities of other countries to ensure proper implementation of the provision of the law, they said.
Several studies conducted by international organisations show that Bangladesh loses around US$ 2 billion because of tax evasion and profit shifting through misuse of transfer pricing by the multinationals every year.
Transfer pricing occurs when a company transfers tangible or intangible output to another company which is a subsidiary of the former or in which it has substantial interest in any form.
NBR officials said that multinational companies evaded tax through the abuse of transfer pricing or mispricing in different ways including capital flight, transfer of dividend and profit to its permanent establishments or parent companies, over-invoicing and under-invoicing during transactions of goods and services within their associated enterprises.
They said that suspicious international transactions of MNCs within their associated enterprises would come under audit to check transfer mispricing.
According to the Finance Act 2012, transactions worth Tk 3 crore in a financial year by the MNCs within its associate enterprises will come under scrutiny.
-With New Age input
