Separate unit to handle MNC tax

FT ONLINE

The national revenue authorities have decided to open a dedicated unit to handle tax files of the multinational companies (MNCs) operating in Bangladesh.

The International Tax Unit (ITU) at the National Board of Revenue (NBR) has been proposed to administer hassle-free services to the multinationals.

According to NBR officials, all the foreign companies, including small and medium enterprises (SMEs), will be brought under the unit.

The decision to form the ITU has been made following a recommendation made by Tax Working Group.

The suggestions came after the third European Union-Bangladesh Business Climate Dialogue held in July 2017.

The event also put forward policy recommendations for assigning focal points in each tax zone to advise foreign SMEs on taxation.

On September 17, 2018, the income tax wing issued a circular regarding the appointment of focal-point officials.

They will provide one-stop service to the foreign investors and taxpayers.

Multiple tax zones now handle tax files of the MNCs and other foreign companies, liaison offices, branch offices and representation offices.

It is alleged that many of the taxmen hardly have the expertise to handle the tax-related issues of the MNCs.

Arbitrary disallowance of expenses often causes a rise in the effective rates of corporate tax.

Foreign Investors' Chamber of Commerce and Industry (FICCI) taxation subcommittee convener Abdul Khaleque said effective tax rate goes up by 10 per cent for arbitrarily disallowance of genuine expenditure.

"We welcome the NBR move to form a separate tax unit for foreign firms. Proper assessment of their tax files would help cut harassment," he said on Monday.

Mr Khaleque, also chief financial officer of Berger Paint Bangladesh, also suggested behavioural changes of the tax-assessing officers.

According to FICCI statistics, some 200 of the foreign companies have tax files here.

Tax officials said skilled taxmen will be appointed to the unit to render services to the foreign investors.

The ITU will be helpful in avoiding cases of arbitrary disallowances of expenses by tax officials, they added.

It will also support a more business-friendly environment for foreign SMEs to flourish.

The officials said the unit will deal with transfer pricing (TP) issues, tax avoidance scheme and thin capitalisation.

Currently, there is a TP cell to look into the cross-border transfer of capital by the MNCs.

As per the NBR data, some 1,000 foreign companies, liaison, branch and representation offices included, are operating in Bangladesh.

Bangladesh and the EU started the business climate dialogue to discuss issues of broad mutual interest in consideration of their longstanding partnership.

The talks usually take place between the EU Business Council and the commerce ministry.