The National Board of Revenue (NBR) has initiated a fresh move against money laundering through transfer pricing system. As part of this move, the revenue board will strictly oversee the international transactions of both foreign and local companies operating here, sources said. Recently the NBR initiated a new tax return form for the corporate bodies and has already sent instructions to all the companies to comply with it.
As per this instruction, all the companies must mention their international transaction records specifically on their corporate tax return files. A senior income tax official told Bangladesh Post that after launching the new tax return form all the old forms are considered invalid. The companies from now on will have to submit their tax returns through filling up the new form.
In the new form, there is a specific point where the companies will have to mention their international transaction records so that tax officials can detect money laundering or capital flights, NBR officials further said. There long have been allegations that many foreign companies do not pay the taxes properly and many of them are involved in money laundering.
Besides, many local companies are also allegedly involved in capital flight in the guise of international transactions, including false declaration and over invoicing while conducting import-export proceedings. The foreign companies generally remit money to their mother companies as profit, interest, capital, and price cost. There are allegations that many of them are involved in remitting their profits and other capitals without paying government’s taxes.
NBR officials said the multinational companies (MNCs) are mostly involved in over-invoicing to dodge revenue while conducting import proceedings from the core company. Hence, they also show lower profit to avoid higher taxes. According to NBR’s new drive, all the companies both locals and MNCs must submit the information of their international transactions separately on their tax return files.
In the definition of international transaction, the NBR said that the foreign companies or its subsidiary companies operating here, and local companies having transactions with such foreign entities will have to fill up their trade information on their tax return file. Besides, if any local company maintains any liaison office abroad and that carry out transactions with any company operating there, will also have to mention their transaction records on the return form.
If any local company continues trading with any foreign entity operating in the country or abroad, will also have to follow this instruction. In 2014, the NBR formed the Transfer Pricing Cell (TPC), a unique unit under tax wing to bring the MNCs’ international transactions under scrutiny to prevent tax dodging and capital flight through misuse of transfer pricing system. The board earlier in August last year reformed the TPC to expedite the move against the fraudulences made by the MNCs’ and other business entities having international transactions.
The TPC found the existence of 921 foreign companies operating here out of which only some 100 to 120 submit their tax returns regularly. Some 814 companies do not submit their tax returns to hide their financial statements. Almost 85 percent of such companies are non-compliant, NBR sources said. Besides, many foreign employees working here also do not submit their tax return, evading huge government’s revenue.
The TPC since January this year started raids on the premises of foreign companies operating here and continue until all such companies are brought under scrutiny.A TPC member told Bangladesh Post that they were now working on making all the MNCs compliant.