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NBR set to curb tax evasion by MNCs

  • Published at 08:35 pm June 30th, 2014

National Board of Revenue is set to try stopping tax evasion, if there is any, by multinational companies as the Transfer Pricing Law becomes effective from today.

The law was initially framed under the Finance Bill 2012 to identify and prevent tax evasion by foreign companies operating in Bangladesh.

The law, however, took two years more to come into effect due to lack of expertise and attitude among both the taxmen and the taxpayers, a high official of NBR said.

“It took two more years as the NBR officials were not capable enough to deal with the capital flight, which requires knowledge of international taxation methods.”

He said around 50 officials are now trained up with international practices to audit the files. The issue would now be dealt by the Transfer Pricing Cell at NBR having 7 to 8 trained officials.

Finance Minister AMA Muhith in his budget speech said the cell will start working from July 1 and will play effective role in preventing money laundering and tax evasion.

According to the Finance Act 2012, transactions worth of Tk3 crore in a financial year by the multinational companies with their associate enterprises will come under the scrutiny.

There are some 200 foreign companies now operating in Bangladesh in sectors, including consumer goods, telecom, energy, beverage, cement, readymade garments and banks.

Under the NBR plan, a number of companies in a limited manner will be brought under the law in the first two years while the number would increase gradually from the next years.

NBR officials have found MNCs evade tax through abusing the transfer pricing in 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.

Different studies show, the country lost a huge amount of tax and capital each year by way of transfer mispricing.

According to a study 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. 

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