The National Board of Revenue has decided to create a tax policy pool consisting of a panel of taxmen to cope with the best practices in international taxation and prevent tax evasion by multinational companies, NBR officials said.
‘NBR officials, in general, are not capable to tackle tax evasion and capital flight by multinational companies through misusing of international taxation and transaction methods,’ a high NBR official told New Age on Monday.
There are many best practices in international taxation and many new practices are being adopted by developed countries to prevent tax evasion and capital flight which remain totally unknown to the NBR officials, he said.
He said that multinational companies usually evaded tax through misusing transfer pricing in international transactions within their associated enterprises and thin capitalistion.
Thin capitalisation is such a method where multinational companies show a huge amount of loans to lessen their profit to evade tax, he explained.
Officials said that Bangladesh’s economy was growing and its openness is widening due to globalisation and Bangladesh’s exposure in international trade and economy.
In the changed context of world and domestic economy, NBR officials should be more capable and fit to prevent any type of tax evasion and capital flight by MNCs, they said.
‘So the NBR took the initiative to form a tax policy pool consisting of around 70 to 80 taxmen who will be expert in international taxation,’ NBR member Syed Aminul Karim told New Age last week.
The NBR is providing the officials advanced trainings on transfer pricing law and other international best practices to increase their capacity in handling international taxation issues, he said.
In an another move to prevent tax evasion and capital flight by MNCs, the NBR has decided to make transfer pricing law operational from next July, officials said.
The provision of transfer pricing has been included in the Finance Bill-2012 but the revenue board went slow on making the rule operational as it found both taxmen and taxpayers were not prepared to enforce and accept it, they said.
Before making the transfer pricing rule operational, the NBR will set up transfer pricing cell and appoint transfer pricing officers very soon.
The finance minister has already approved the proposal of establishing TPC, an official said, adding that the cell will be formed consisting of 6-7 taxmen.
Transfer pricing officers will undertake audit transactions made by the MNCs to check tax evasion and illegal capital flight from Bangladesh, he said.
He said that suspicious international transactions of MNCs within their associated enterprises would come under audit by July next year to check transfer mispricing.
According to the Finance Act 2012, transactions worth of Tk 3 crore in a financial year by the MNCs within its associate enterprises will come under scrutiny.
There are more than 200 multinational companies working in Bangladesh and there is an allegation that the country is losing huge amount of revenue every year due to misuse of transfer pricing by them.
Several studies conducted by international organisations show that Bangladesh
loses around $2 billion because of tax evasion and profit shifting through misuse of transfer pricing by the MNCs every year.
According to a study carried out by the Washington-based Global Financial Integrity in 2011, Bangladesh suffered the highest amount of illicit financial flow of $34.8 billion from 1990 to 2008, and it is losing $1.8 billion every year through capital flight due to misuse of transfer
pricing.
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.
-With New Age input
