Hopes high to start MNCs’ audit from Jan
Transfer Pricing Cell (TPC) of National Board of Revenue (NBR) has been in a dysfunctional state during the last five years due to lack of necessary expertise and skills of taxmen on international taxation.
Subsequently, NBR could not make the cell vibrant despite several initiatives since its formation in 2014.
Main objective of the cell is to audit statement of international transactions (SITs) of multinational companies (MNCs) to find out their illegal profit shifting.
However, the cell could not even start any audit under the TP law that came into force in 2013.
Talking to the FE, a senior tax official said NBR reconstituted the TP team on August 20 by including officials having knowledge about, and interest in, international taxation.
“We hope, TPC will be able to start audit of the MNCs’ tax returns and SITs from January,” he said.
The eight members of the reconstituted team will work as transfer pricing officers (TPOs) in addition to their regular job as income tax officials.
On August 13, NBR also formed a 17-member resource pool for TPC, involving some top tax officials.
One of the team members said the TPOs should be dedicated officials for TPC, so that they can analyse data of the MNCs’ transactions.
“The TPOs should be included in the NBR organogram. Tax officials, assigned as TPOs, would naturally remain busy doing tax collection and monitoring in their respective zones.”
He said there are huge scopes to find out tax evasion through proper enforcement of the TP law, as TPC found 85 per cent companies non-compliant in the country.
Around 150 MNCs regularly submit their SITs to the NBR, although some 1,000 MNCs, including branches and liaison-representation offices, operate in Bangladesh, according to findings of the cell.
Officials said slow pace of NBR in execution of the law creates scopes of illegal profit shifting by the MNCs.
Transfer pricing occurs when a multinational company pays or gets payment for purchase or sale or transfer of any tangible or intangible output to any of its associated or subsidiary companies in which the MNC has substantial interest in any form.
The tax officials said SITs of the MNCs are usually prepared by highly skilled professionals having vast knowledge on international taxation.
It is difficult for the taxmen to detect any evasion from those SITs without adequate training on different relevant techniques, including Base Erosion and Profit Shifting (BEPS), they noted.
Earlier, the Netherlands government assured Bangladesh of providing necessary cooperation to TPC, including developing skills of the taxmen.
The officials further said the TP law has adequate provisions to check and detect illegal profit shifting by MNCs.
In 2015, TPC collected information and compiled a database of the MNCs and their SITs to start audit of tax returns.
The cell also had a plan to conduct a survey to find out the actual number of MNCs and their braches operating in the country. However, the plan did not get approval of NBR to move forward.
NBR wants to move cautiously with the TP law, fearing negative impact on the country’s foreign direct investment (FDI) inflow, the officials added.