Shamsul Huda
The government is yet to devise an effective mechanism to detect and prevent the flight of capital from the country, estimated at around $1.8 billion a year, through various means.
Though a law was framed to set up a Transfer Pricing Cell (TPC) to detect the capital flights, it could not be made functional yet, the sources said.
Referring to the US-based Global Financial Integrity (GFI), Syed Md Aminul Karim, member for policy of the National Board of Revenue (NBR), told the FE that flight of capital amounting more than $ 1.8 billion was taking place every year.
Capital flight is transfer of money abroad through the means like mispricing, higher payments to foreign nationals, under-invoicing, over-invoicing, unauthorised investment abroad and paying for ‘investor visas’ in other countries.
According to an NBR source, the government framed a law to establish the TPC that would help detect capital flights resorted to by different quarters, including multi-national companies (MNCs).
But the TPC was yet to get going and they were just training officials on how to detect mispricing, Mr Karim said.
When contacted, Foreign Investors’ Chamber of Commerce and Industry (FICCI) President Syed Ershad Ahmed, however, sought to defend the MNCs.
He said the MNCs comply with international auditing standards, unlike some international companies. So international companies and MNCs operating in Bangladesh are not the same, he added.
Mr. Ershad also said the MNCs follow the Foreign Corruption Practice Act (FCPA) and the EU Anti Corruption Law and they maintain transparency in their accounting books.
“It is not true that the MNCs operating in Bangladesh are abusing the legal transfer pricing (TP),” he said.
A multi-entity company operating in Bangladesh follows the ‘Arm’s Length’ pricing system through its different wings in different countries, he mentioned.
A source involved with pre-shipment inspection (PSI) said: “I think the MNCs are clean as far as their transfer pricing is concerned. They maintain the global auditing standard and also abide by different anti-corruption acts.”
Quoting the GFI, Mr Mustafizur Rahman, Executive Director of the Centre for Policy Dialogue (CPD), said capital flights from Bangladesh to the tune of more than $ 34 billion took place during the period between 1990 and 2008, leaving the NBR to incur revenue losses.
He said there was no proper study on under-invoicing and capital flight from Bangladesh.
Mr Mustafiz said the NBR framed a law to curb transfer mispricing by different quarters.
When the TPC would start functioning under the law, it would detect mispricing and provide year-wise data.
He said both the NBR and the Bangladesh Bank (BB) should work together to detect irregularities in such transactions and thus curb capital flights.
An official of the BB said: “We do not have any actual data on capital flight.”
He said: “As per our export receipts and the import calculations by foreign buyers, there is a big gap between the earnings that we calculate and our official figures. That means money laundering is taking place on a large scale every year.”
The BB official put the current export base at $ 27 billion, as per the official data. If there was an actual estimation of exports, the figure could be far higher than that shown in the official record, he added.
He said the anti-money laundering act should be enforced properly to put an end to such malpractices.
A source in an MNC operating in Bangladesh said Bangladeshi entrepreneurs made a lot of capital investments in apparel business in some Asian countries. That was a clear indication of capital flights, he added.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) former president Abdus Salam Murshedy said there might be some isolated cases in which the exporters showed low export value while getting high value abroad.
They might not bring home the extra money and, instead, invest the money abroad bypassing Bangladesh’s Foreign Exchange Regulatory Act-1947.
But if there were any such cases, action should be taken against those involved, the former BGMEA president said.
But most of the exporters have to repatriate their earnings home to continue their business, he said.
Source Article from http://www.thefinancialexpress-bd.com/index.php?ref=MjBfMDlfMTJfMTNfMV8xXzE4MzExNw==
