The National Board of Revenue has taken a move to subscribe to the database of comparable international transfer pricing to facilitate effective audit of transfer mispricing by the multinational companies operating in the country.
The database consists of information on international arm’s length price of goods and services, royalty, interest and income transfer by the MNCs.
Transfer pricing (TP) cell of the revenue board is yet to be implemented fully even after seven years of framing the rules due to lack of logistics, mainly absence of access to the international database.
The NBR in 2013 framed the TP law and formed the TP cell in 2014 to bring the MNCs’ international transactions under scrutiny to prevent tax evasion and capital flight by the MNCs through misuse of transfer pricing system.
The NBR is now going to subscribe to the database under the ‘Supporting the implementation of PFM reform Strategies Plan’ in Bangladesh programme worth 10 million euro funded by the European Union.
The Planning Commission has already approved the programme.
The revenue board will receive 3 million euro from the fund for addressing revenue risk management, audit, expansion and internal audit issues.
Officials said that the NBR would arrange training for TP officials to develop their skills on extraction of data from the database for auditing tax files of the MNCs.
They said that the cell could not effectively conduct audit on statement of international transactions (SIT) of the MNCs operating in the country to find if the statements were accurate or if the MNCs evaded taxes through such transactions.
Transfer pricing occurs when a multinational company pays or gets payment for purchase or sales or transfers of any tangible or intangible output to any of its associated or subsidiary company in which the MNCs have substantial interest in any form.
Transfer of profit, royalties and other income also come under the purview of TP system.
There are allegations that many MNCs evade tax and transfer fund from the country by misusing the system including over-invoicing and under-invoicing during transactions of goods and services within their associated companies and transfer of dividend and profit to their parent companies as the corporate tax rate is lower in the country where the associated or parent companies are operating.
TP officials require verification of SITs of the MNCs to check tax evasion and capital flight, they said.
Access to the global database will help TP officials to conduct audit effectively.
There are some global and regional renowned companies that maintain database on international transactions, including ORBIS of Bureau van Dijk, OneSource by Thomson Reuters, S&P global and regional database Captitaline of India.
There is also some royalty based database, including RoyalityStat and RoylityRange.
Officials said that the TP cell had already assembled profiles of 921 MNCs, including branches and liason offices of the MNCs, based on the data collected from field-level income tax offices.
The profiles include ownership, period of operation, activities, status of employees, names of top employees, bank accounts and expenses of Bangladesh operation of the MNCs.
Of the companies, only around 16 per cent provided SITs to the cell although the submission of an SIT is mandatory for a foreign firm having international transactions.
A number of MNCs, however, voluntarily deposited Tk 10 crore in additional taxes adjusting their international transactions in the fiscal year of 2018-2019.
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