The Transfer Pricing Cell, formed three years back to prevent tax evasion cases by multinational companies through misuse of transfer pricing system, is going to start work in January next.”We’ve collected reports of multinational companies. We’ll start the auditing in full swing in January 2017,” a senior official at the National Board of Revenue (NBR) told UNB.Transfer price is the price at which divisions of a company transact with each other for goods or services. It usually takes place when two related companies, like parent company and subsidiary, or two subsidiaries controlled by a common parent, engage in international trade with each other for goods and services.According to international laws, transfer pricing is not illegal, but ‘transfer mispricing’ is. Sometimes, related entities of a multinational firm show artificially high prices for an imported product or service in an attempt to evade taxes. This practice is known as ‘transfer mispricing’.Convoluted rules and legal loopholes allow multinational companies to manage their tax arrangements in such a way as to minimise their tax liabilities depriving developing country governments of vital revenues, according to a report titled ‘Getting to Good: Towards Responsible Corporate Tax Behaviour’.
The report was released here in April last.In February 2014, the NBR formed the cell and in April 2015 it appointed seven transfer pricing officials to examine and audit the statements of international transactions of the multinational companies to find out whether the statements are accurate and the companies evade taxes through such transactions.Later, in September last year, the TPC asked the field-level income tax offices to provide the copies of such statements submitted by multinational companies (MNCs) to their respective tax offices.There are some 175 MNCs operating in Bangladesh which would come under TPC scanner.Meanwhile, the NBR last year issued rules along with a prescribed form for the MNCs to submit details of their international transactions with the tax returns.According to the rules, the prescribed form should be signed and verified by the person authorized to sign the return on income. Their accounts and records will be maintained separately as prescribed.The Transfer Price Cell would handle tax files of the taxpayers involved in international transactions.The Cell officials will determine the price and send a report to the circle office to complete assessment on the basis of decision by the official concerned.According to the rules, the multinational companies’ international transactions will be “monitored and assessed carefully” by an expert group of taxmen.The Deputy Commissioner of Taxes (DCT) may impose a penalty equivalent to a maximum one per cent of the value of each international transaction in case of failure to keep, maintain or provide information, documents or records to him or comply with the notice.The DCT can impose a penalty up to Tk 300,000 for failure in giving report by chartered accountants.