IN view of the widespread tax evasion and money laundering by several multinational companies (MNCs) using misleading trade bills and statement of accounts, the National Board of Revenue (NBR) has appointed seven income tax officers as transfer pricing officers (TPOs) for scrutinising accuracy of their international transactions to prevent tax frauds and illegal capital flight. Here the MNCs are mainly abusing transfer pricing of their trade bills in repatriating income to another subsidiary outside the country. In the process they are reportedly laundering capital while depriving the nation of hefty amount of revenue and income from unpaid tax.
Washington-based Global Financial Integrity Report-2014 showed Bangladesh ranked 51 in a list of 145 countries; which is adversely affected by illicit capital flight. We believe that the NBR step to bring the MNCs transactions under the inclusive scanner is a good initiative that would go a long way to plug the loopholes and boost revenue to the national exchequer. The step must go unhindered ignoring any attempt specially from politically influential quarters which are also involved in illegal transfer of money, to block it on the way.
The Global Financial Integrity report that said capital flight from Bangladesh tripled to USD 1.78 billion in 2014 from its 2011 estimates of USD 5,931 million, appears quite shocking. The other disclosure that the country lost around USD 14 billion in capital flight from 2001-2010 and 75 percent of it was stolen through manipulation of export-import invoicing is also highly devastating. There are some other statistics such as deposit of Bangladeshi nationals in the Swiss National Bank in 2013 showed a 62 percent rise, is also indicative of massive capital flight in absence of an effective revenue administration to stop the capital flight.
TPOs may now ask MNCs to produce separate statements on the nature of international transactions made within their subsidiaries or parent companies. As they are trained to detect the proper value of any transaction, false practices will be easily verified. In doing it they (TPOs) will use a mechanism called ‘arm’s length price’ to verify the accuracy of MNCs trade statements. The arm’s length price is a price at which two independent or unrelated entities trade and it will be able to show the extent of manipulation of trade bills.
As we have always said the country’s revenue administration need to be effectively reorganized without wasting time and losing further resources as the staggering statistics showed. Manpower at NBR also need to be increased. They must be highly trained and their integrity factor to fight corruption and big money laundering cases must be high to deal with sensitive cases like the money laundering now resorted to by some multinationals. We must say they must stop illegal money transfer while their transactions must go under high scanner. We hope the NBR efforts will bear fruits.
