The National Board of Revenue (NBR) introduced the 'Transfer Pricing Scheme' hurriedly in the financial year 2011-2012. It, however, did not make any provision for infrastructure development to promote the scheme among concerned members of the public. Even it did not make any publicity for assessees, multinational and local companies engaged in international transactions particularly in case of garment sector, professionals, lawyers, chartered accountants and businessmen at large. As a consequence, businessmen and investors remain in the dark about the scheme.

Now, after long 3 years, the NBR has woken up to shift the burden of vigilance to businessmen about transfer pricing. If we go back to our existing system of taxation, we find that the same techniques are prevalent now and are included in the transfer pricing system. The tax authority has already started the practice of raising sales on estimate basis as against the actual claim of the assessee and gets a huge amount. If the tax officers do not find any cogent reason against the sales recorded through bank receipts by the assessee, then they resort to raising the rate of gross profit ratio. This practice of similar nature is also being proposed to be carried out to find out transfer price by the enterprises through international transactions.

In the transfer pricing scheme, we find that the same views are also being encouraged by the NBR to collect taxes in the name of transfer price transactions. The NBR is of the opinion that profit is being avoided by enterprises by following tricky techniques to transfer prices to other tax-haven countries. To illustrate transfer price, we give the following examples:

According to the NBR, 'X' company in Bangladesh has avoided £ 30 over the sales price of £ 150. Sale price of the Bangladesh company is lower than that of other countries and therefore, it is losing by £ 30 with tax collection being 'zero' in Zambia. So far, we understand, if an assessee adopts legal means to avoid any tax, it is called 'tax avoidance". In many tax cases, it is decided by the High Court that if any legal means are adopted by an assessee, it will be considered as legally transacted amount and no tax can be charged on profit from that transaction.

From the above exercise, we find that 'Z' company is a subsidiary of 'X' company which sells its product to the former at £ 120. Thus 'Z' company earns profit of £ 20 as it purchases goods from its mother company and sells it at £ 150 and thereby earns £ 30 without paying tax. 'Z' company of Zambia later on transfers the sale value and profit to 'Y' company of the UK at the instruction of 'X' company. No doubt, the UK company and its Zambian counterpart are enjoying tax benefit from these transactions. But it should be kept in mind that the Bangladeshi company is also earning huge forex in dollars and on conversion of dollars into Bangladeshi Taka, is getting higher amount in BDT out of the above transaction. In fact, indirectly, the Bangladeshi company is also getting the benefits out of the transaction and can boast of earning forex in the name of huge export.

But in the absence of foreign investment in Bangladesh, the NBR has no other way but to fall upon the above scheme particularly in the transaction made by multinational companies carrying business in Bangladesh. While foreign investors are found shy of capital investment in Bangladesh, any wrong decision in implementing such a scheme of transfer pricing may be found counterproductive. When we have very limited number of MNC/MNE in Bangladesh, we cannot compare our position in respect of foreign investment with a neighbouring country like India.

India has a huge number of foreign companies doing business but still it is seeking more investments from foreign countries. Of course, litigations are also there over transfer pricing due to its introduction of transfer price scheme in India. In every 25 minutes, one application of appeals is being filed. But we should keep in mind that India has due infrastructure development to absorb transfer pricing having efficient and skilled manpower to face any adverse situation which we cannot expect now at this nascent stage of the implementation of such policies.

President of the Dhaka Chamber of Commerce and Industry Hossain Khaled has expressed his concern that Bangladesh does not have qualified and skilled manpower to withstand the situation that may arise on introduction of transfer price by the NBR so quickly. Similarly, ex-chairman of the NBR Muhammed Abdul Majid also expressed similar views over the introduction of 'transfer pricing scheme' in Bangladesh hurriedly and hastily. According to him, it will be very difficult to cope with. Because, there is an acute dearth of efficient manpower in the NBR to chase transactions with credibility. According to him, stoppage of flight of capital by giving false declaration or quoting false information on the price of goods by foreign or local company cannot be controlled by the NBR alone as it has got no skilled manpower at the moment. Tax officials are not trained sufficiently by this time to grasp the situation if 'transfer price scheme' is taken into hand by the NBR.

We feel we should take more time to train our tax officials in the light of the transfer price regime. Only training of tax officials on transfer price will not help. We are to make vigorous publicity about the transfer pricing system and to bring members of the public, investors, taxpayers, lawyers, professional chartered accountants and cost and management accountants and particularly assessees of local enterprises to be acquainted with the system and its easy application.

In this respect, the Institute of Chartered Accountants of Bangladesh is playing a pioneering role in imparting training to its old, middle and young members of the institute vigorously. The institute is holding conferences, seminars, workshops and discussion among its members. High officials of the NBR share the views of the members of the institute. The ICAB also arranged training over quality control on audit and assurance along with transfer pricing for its members throughout the month of April, 2015.

If the operation of the transfer price scheme could be delayed for a few months or year, there will be no chance of the NBR losing revenue. The attitudes of the tax officials are enough to check evasion of revenue. Every businessman - local or foreign -is alert about international transaction. Here the NBR did not fix any amount of transactions for applying such scheme of transfer pricing.

The country's garment factories are doing business of international transactions and bringing forex to the country. But small garment companies are doing business in a very limited way and they will be affected if they are to follow such scheme of transfer pricing now. Moreover, Bangladesh, being a lower middle- income country, cannot negotiate its deals strongly with foreign countries in respect of price as foreign companies are always enjoying the upper hand in this respect. Under these circumstances, the NBR should not be harsh.