Government's revenue authority plans a search as many foreign companies, including liaison and representation offices, allegedly dodge submission of tax returns despite doing income-generating activity.
Officials said the income-tax authorities have decided to launch a 'functional survey' after having smelt such truancy and also loopholes that are used to evade tax payment.
According to recently compiled information, the National Board of Revenue (NBR) has found some 1,000 foreign companies operating in Bangladesh.
All of such foreign companies having international transactions are supposed to submit statement of international transitions (SIT) to their respective tax circles.
During the last two years, the NBR had received on average less than 150 SITs annually.
Through the data, taxmen suspect a majority of the foreign companies are yet to play any role in income sharing with the Bangladesh government, using different tax-dodging tactics. Transfer mispricing is one such conduit usually used.
Specially, some of the foreign representation offices in Bangladesh got involved with income-generating activity but didn't submit SITs.
Transfer Pricing Cell (TPC) of the NBR is currently working on this issue to ensure tax compliance by all multinational companies (MNCs).
In an initial survey, the board has collected information of the number of foreign companies from different sources including Foreign Investors Chamber of Commerce (FICCI) and NBR field offices.
"We have planned to launch a new kind of functional survey to find out the foreign companies and see their international transaction status," said a senior tax official.
In the functional survey, the foreign companies will have to respond to some queries of taxmen in writing.
They will have to furnish details of functional status of the firm including their tax-payment status, nature of business in Bangladesh, types of the firm like whether it is mainstream company or branch office or liaison office or so.
Information related to international transactions with its associated enterprises abroad, status of their parent company, job descriptions of top management and some other financial details of the firm will also have to be furnished.
The official said data of the number of foreign companies are scattered in the different tax circles across the country. It is difficult for taxmen to find out actual number of foreign corporate taxpayers.
In a rough estimate, taxmen had data of some 175 large and medium-scale foreign companies in Bangladesh. The number has jumped to 1,000 after the initial survey accumulating their liaison and branch offices.
The tax official said the initial survey is groundwork before the start of audit under the transfer-pricing law.
Income-tax officials said taxmen are yet to get opportunity to build their capacity to detect the loopholes of tax evasion by the foreign companies.
Huge capacity-development training is needed on international taxation to build capacity of the tax officials, they said.
"International tax consultants are smarter than our tax officials. We have to build a dedicated team for dealing with the international taxation," the official said.
Currently, only few tax officials, less than 1.0 per cent, have the capacity to assess international transactions and find out concealment in it, he said.
Parliament passed the Transfer Pricing Act 2012 that came into force in 2014 but the NBR is yet to start auditing multinational companies under the law.
Officials said inadequate capacity of taxmen and lack of necessary supports are responsible for the delay in enforcement of the law.
Tax officials have adopted a go-slow policy on enforcement of the TP law as both taxmen and the MNCs need some time to acclimatise with implications of the law.
They said some of the foreign companies are showing better compliance after the TP law took effect. It is a positive sign as they got the message before enforcement of the TP law.
