NBR to review double taxation treaties amid controversy [ Tritiyo Matra News ]

NBR to review double taxation treaties amid controversy

Local July 12, 2016

The National Board of Revenue has decided to review the Avoidance of Double Taxation Treaties the country signed with different countries in a bid to make those treaties up-to-date, ensure the country’s interest in taxing on dividend income of multinational companies and facilitate information sharing related to money laundering, tax evasion and other issues related to income tax.
Initially, the revenue board will revisit the agreements, known as DTAs, with some countries important for various aspects related to money laundering, transfer pricing and illicit financial outflows and those signed before 1990, officials said.
The revenue board took the decision at a recently held coordination meeting following a report of the UK-based development organisation ActionAid which claimed that Bangladesh had 18 such treaties highly restrictive for the country in terms of collecting tax from multinational companies.
The report titled ‘Mistreated: Tax Treaties that Are Depriving the World’s Poorest Countries of Vital Revenue’ published in February said that the country incurred revenue losses worth US$ 85 million or Tk 700 crore in 2013 alone due to a single rule of the treaties related to tax on dividend income of MNCs.
A high official of the NBR told New Age that though the report was faulty in some aspects, the board decided to review the agreements to remove the flaws, if any.
Generally, the agreements managed to protect the interest of the country, he said.
He said that the revenue board had already communicated with Netherlands and Switzerland to review the agreements with those countries.
International taxation wing has already started communicating with some other countries to amend agreements.
Currently, Bangladesh has DTAs agreements with 32 countries such as Belarus, Belgium, Canada, China, Denmark, France, Germany, India, Indonesia, Italy, Japan, KSA, Malaysia, Mauritius, Myanmar, Netherlands, Norway, Pakistan, Philippines, Poland, Romania, Singapore, South Korea, Sri Lanka, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom, USA and Vietnam.
Of which, Bangladesh signed the agreements with Belgium, Canada, France, Germany, Italy, Malaysia, Pakistan, Romania, Singapore, South Korea, Sri Lanka, Sweden and United Kingdom in or before 1990.
The DTA is an international tax treaty which is signed to boost cooperation in the areas of trade and investment between two countries, prevent tax evasion and avoid double taxation of entities and persons in countries.
Officials said that Bangladesh determined the terms and conditions of the agreements considering the potential of attracting foreign direct investment from the counterpart countries.
The revenue board also considers the terms and conditions of other countries considered as competitive ones including Vietnam, Thailand and India so that Bangladesh remains an attractive country for foreign investors, they said.
In the agreements Bangladesh signed, the average rate of income tax on dividend is 15 per cent while the regular rate of tax on dividend is 20 per cent in the country.
The rates of tax on dividend, however, varies from 5 per cent to 10 per cent for some countries based on shares of MNCs in the joint venture companies in Bangladesh.
The revenue loss due to difference of 5 per cent tax on dividend is considered to be compensated following investment, employment generation and economic activities, they said.
Currently, countries follow the model of United Nations and Organisation for Economic Co-operation and Development in signing DTAs.
Bangladesh signed many agreements before 1990 which did not include many issues related to money laundering and information sharing emerging in recent times.
Countries like Switzerland, Malaysia and United Arab Emirates did not respond to the query of the revenue board for providing information about Bangladeshis who deposited money in Swiss banks, made investment in Malaysia’s second home scheme and investment scheme in UAE.
So, the revenue board will review the agreements to address the problems for ensuring country’s interest through making those modern and up-to-date and including provisions related to information sharing, a NBR official said.
He said that the revenue board would now give the country’s interest the highest priority in signing amending the agreements and signing new agreements.
Currently, the revenue board is either carrying out negotiations or communicating to sign the agreements with 28 countries.
The revenue board has also completed negotiations with Morocco, Bahrain and Qatar while conducted the first round of negotiations with Azerbaijan, Kirgiz Republic, Spain, Portugal, Egypt, Russia, Iran and Hong Kong to sign the agreements.
It has also been communicating with another 16 countries including Algeria, Bulgaria, Czech Republic, Ethiopia, Finland, Greece, Jordan, Luxemburg, Macedonia, Nepal, Nigeria, Oman, Ukraine, South Africa and Uzbekistan.