The tax authority of Bangladesh has taken a move to revise a number of age-old double taxation avoidance treaties with major trading partners and incorporate new protocols commensurate with the digital economy.
The revised protocols of DTA agreements (DTAAs) with 13 countries have already been sent to the concerned authorities through the diplomatic channels, officials said.
The Netherlands, Canada, the UK, France, Switzerland, Singapore, Sweden, Norway, India and Mauritius are among the countries selected by the National Board of Revenue (NBR) for revision of the DTAA protocols with them.
A number of DTAAs needed revision as Bangladesh was seeking a taxing right to the digital economy, said Niaz Morshed, second secretary of the income tax (international taxation wing).
"We have sent the revised protocols to the Ministry of Foreign Affairs to proceed on this," he added.
Globally, the services and digital economy are growing significantly.
The existing DTAAs have exempted the non-resident companies not having permanent establishments (PE) from payment of taxes.
The footprints of a number of global giants in Bangladesh have created the scope of collecting taxes on virtual transactions.
The companies are earning profits from Bangladesh, but the tax authority is unable to trace their income.
In 2021, Google's parent company Alphabet saw a 41 per cent year-on-year jump in revenue to $257 billion. The company reported revenue earnings of $75.3 billion in the fourth quarter of 2021, up 32 per cent from the year earlier.
Currently, Bangladesh has DTAAs with 36 countries.
Bangladesh signed a DTAA with India in 1993 and later it was updated in 2013.
The DTAA with France was signed in 1989. The deal with the Netherlands was signed in 1994, Singapore in 1982, Switzerland in 2010, Mauritius in 2012, Canada 1985, USA in 2007, UK in 1980, Norway in 2006 and Malaysia in 1990.
An expert of international taxation, Al Maruf Khan, fellow member of Institute of Chartered Accountants of Bangladesh (ICAB) and a partner of Grant Thornton Bangladesh, suggested synchronization of DTA and direct tax law to address the loopholes.
He said it takes four to five years of time to negotiate revision of the DTAA.
However, a DTAA needs to be revised after every 15 to 25 years as business processes usually change during this long period.
"The DTAA is a bilateral issue that needs consensus of both parties. Negotiation ability is important for this," he said.
The DTAA ensures that a person would not pay tax twice in two countries on the same income and, at the same time, s/he would not be able to escape payment of taxes on his income.
Former income tax member Aminur Rahman, also adviser of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) tax consultative committee, said the DTAAs should be updated with the major trading partners.
He, however, said signing DTAAs with middle-east countries turned suicidal for Bangladesh as they have no personal income tax, except carbon tax and Zakat.
In 2013, Bangladesh and India amended the DTAA provisions on tax information exchange and student income tax provisions.
DTAA is an important provision in the income tax ordinance to attract foreign direct investment (FDI) and facilitate transfer of technological know-how.
Provisions of DTAA are not identical and it varies from country to country on the basis of the pattern of bilateral relationship.
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