The National Board of Revenue (NBR) has begun restructuring its international tax wing to help foreign investors and stop illegal profit shifting by multinational companies (MNCs).
The move comes as the government seeks more foreign investment and plans free-trade agreements with several countries. The NBR will bring its transfer pricing (TP) cell set up in 2014, under the International Tax Unit (ITU). A separate office will be rented for the unit.
In its first year ITU will review whether the income tax law needs changes especially its rules on international taxation and transfer pricing. A senior tax commissioner said the cell will also monitor cross-border deals involving local companies not only MNCs.
An NBR committee led by Appeal Commissioner Shah Ali is defining the unit's jurisdiction. A commissioner has been named team leader. At present, MNC tax files are spread across 33 tax zones. The ITU will bring them under one roof and supervise them. It will also handle double taxation avoidance certificates, tax clearance certificates for foreign nationals travelling abroad and other approvals.
The need is clear. The Tax Justice Network estimates that Bangladesh lost about $1.27 billion in corporate and individual tax revenue between 2016 and 2022. Corporate tax losses made up around $1.20 billion. Tijmen Tuinsma, a research fellow at the network said about 95 per cent of the country's tax losses come through corporate profit shifting. He urged countries to agree to public Country-by-Country Reporting under the UN tax convention now being negotiated.
The TP cell has struggled. Officials say it is largely inactive and enforcement of the transfer pricing law has stalled for three years. Some officials trained with European Union support have been moved to other tax zones. "Unless dedicated officials are appointed to the TP cell or ITU, such training will not pay off" a senior official said. A team from Poland is expected to visit to discuss transfer pricing.
Bangladesh has at least 500 foreign companies, including branch and liaison offices, according to NBR reviews. They have submitted Statements of International Transactions as the cell directed.
Professor Mustafizur Rahman of the Center for Policy Dialogue welcomed the ITU. He said the NBR needs real-time data to check for evasion. He also said the unit should not wait for project funding as the expiry of project funds ended earlier efforts.
Rupali Chowdhury, president of the Foreign Investors' Chamber of Commerce and Industry welcomed better coordination. She said MNCs are among the most compliant taxpayers because they follow global accounting standards and transact digitally.
