Watchdogs to nose out sneaky cross-border money transaction

A new watchdog team of the revenue authority is ready to start operation to check transfer mispricing by the multinational companies (MNCs) on their tax returns as such trick is allegedly used in underhand cross-border transactions.

The revenue board recently completed appointment of officials for enforcing the measure. It was the main step to start formal operation of the Transfer Pricing Cell.

Some seven tax officials have been assigned to work in the Transfer Pricing Cell of the National Board of Revenue (NBR).

Transfer pricing is a major tool used for corporate-tax avoidance that could be checked by scrutinsing cross-border transactions by the MNCs, he mentioned.

The NBR issued a circular last week by assigning the Transfer Pricing Officials (TPOs) for the cell.

The officials include joint commissioners Dr AKM Atiqul Huq, Md Shabbir Ahmed and Dr Md Nurul Amin, deputy commissioners Mollah Salehin Siraj and Md Atatul Huq, and assistant tax commissioners Farjana Nazneen and Iffat Jahan.

A senior tax official said, “The appointment of the TPOs was the last stitch to groundwork for formal functioning of the TP cell.”

There are some 175 MNCs operating in Bangladesh who would come under TPO scanner, he said.

“MNCs with a large volume of overseas financial transactions would be monitored closely,” the tax official said.

Meanwhile, many of the associations and organisations of professionals came up with initiatives to train up Chief Financial Officers (CFOs) of different MNCs on transfer mispricing.

The Institute of Chartered Accountants of Bangladesh (ICAB), KPMG, and Hoda Vasi have organised some workshops for the MNCs to build awareness on transfer pricing.

Shahadat Hossain FCA, a council member the ICAB, said the concept of TP, where bilateral issues and costing of goods are involved, is new to Bangladesh.

The TP rule was issued by the NBR under a provision incorporated into the Finance Act 2012.

According to the rules, accounts and records of MNCs will be maintained separately as prescribed. Particulars of international transactions, tangible property of revenue and capital nature of transaction should be furnished in the form.

The tax official said MNCs take recourse to strategy to reduce total tax incidence of a company by shifting profits to the country where corporate-tax rate is comparatively lower.

Inflated prices of products and raw materials, consultancy charges and other means have been shown for transfer mispricing, he pointed out.

TPOs will determine the prices and send a report to the circle office to complete assessment on the basis of decision.

Industry-insiders said higher corporate tax in Bangladesh is a major reason for transfer mispricing.

Many companies are discouraged from showing high profit as they have to pay corporate tax at a higher rate, they added.