Transfer mispricing

NBR to beef up capacity to detect tax evasion by MNCs

Doulot Akter Mala | Published: June 04, 2019 09:17:27 | Updated: June 14, 2019 12:12:08

The revenue authority would soon impart training to its officials to build in-house capacity for proper enforcement of the transfer pricing law.

The training will be on risk assessment and company profiling to help audit the tax returns of the multinational corporations (MNCs) and check transfer mispricing.

Officials at the National Board of Revenue (NBR) said they would start auditing tax files of MNCs under transfer pricing law from this year.

Although the authorities put into effect the law in 2014, they could not audit tax files due to the lack of capacity of the taxmen and insufficient logistics.

Officials said the board has recently taken the step to impart training to the taxmen so that they can enforce the law.

The Netherlands will provide technical assistance to train 25 taxmen on the law enforcement.

It will be an online training having 15 intensive stages on the pros and cons of the transfer pricing (TP) issue.

The training programme will start from the second week of June and will continue for three to four months.

Officials said that after completion of the online training, taxmen would be able to detect evasion by the MNCs using advanced technique.

The International Bureau of Fiscal Documentation (IBFD) of the Netherlands will provide the training in cooperation with the Netherlands Tax and Customs Administration (NTCA) and the Dutch ministry of foreign affairs.

The training will focus on international tax planning, the role and importance of TP in corporate international tax planning, comparability analysis in TP, functional analysis, and TP methods.

Some selected issues, including managing substance in TP, substantive tax planning, supply chain restructuring, TP of intra-group services, TP aspects of R&D (research and development) and intangibles, risks and opportunities in intra-group finance, TP documentation, TP, customs and indirect taxes, TP risk assessment will also be covered in the training programme.

Advanced TP workshops on the use of a TP database, auditing will also be held online.

A senior tax official said MNCs hire expert financial officers to maintain accounts and they use advanced technology.

"It is difficult for the taxmen to detect tax evasion through transfer mispricing and recover the amount they evade given the existing capacity. Transfer pricing is quite specialised and globally a new issue," he said.

He said taxmen will need continuous training in this to keep them updated with the changing global business scenario.

Currently, the board has eight dedicated Transfer Pricing Officers (TPOs), he added.

In 2014, the NBR implemented the TP law to check tax evasion and capital flight by MNCs through transfer mispricing.

Until 2016, the Transfer Pricing Cell (TPC) of the NBR remained almost dysfunctional due mainly to the lack of logistics, including the database of comparable international transfer pricing, experts and dedicated skilled manpower and proper initiative of the tax authorities.

However, the TP law has stated paying off since 2018.

The taxmen received additional taxes worth Tk 100 million from seven multinationals.

The MNCs have paid the income taxes voluntarily through re-adjustment of their tax files following the transfer pricing guidelines of the income tax wing.

The MNCs include a mobile phone operator, four readymade garment exporters and two branch offices of a global electronics brand.

Transfer pricing takes place when an MNC pays or gets payment for the purchase or sale or transfers of any tangible or intangible output to any of its associated or subsidiary company in which the multinationals have substantial interest in any form.


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