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The Financial Express

Combating corporate tax abusing nexus  

| Updated: November 26, 2020 23:00:26


Evaly and Fianancial Express Evaly and Fianancial Express
Combating corporate tax abusing nexus   

Tax evasion by private individuals and multinational corporations is a bane of nations worldwide. Such tax abusers get away with their dishonest practice through legal loopholes as well as with the connivance of a section of the corrupt government officials of the host countries. In this way, these two groups of tax dodgers fleece nations of their public money. The public funds so stolen on a global scale are usually shifted to offshore tax havens. This is a colossal waste of national resources that could be used for public good. As revealed by the global alliance for tax justice, a UK-based tax watchdog, the amount of tax money so lost to the multinational corporations (MNCs) and private individuals is mind-boggling--worth trillions of dollars! The amount siphoned off every year through such deceptions from Bangladesh alone is equivalent to around 3.5 per cent of the nation's total tax revenue. And if compared to the nation's annual public health expenditure, it would come to about 60 per cent of what was earmarked for the health budget for FY 19, about Tk 60 billion (or around US$703 million). Putting the loss to the economy into perspective, the sum of tax money thus taken outside the country by corporates and individuals could be used to pay one year's salaries for close to 400,000 Bangladeshi nurses. That apart, just to think of how much help this amount of money would be in such pandemic-ravaged times. It could be used to recruit more health workers and professionals, buy larger quantity of lifesaving drugs and equipment.

The sheer magnitude of the national wealth flowing out of the country every year is upsetting. Such avoidable drain on the public exchequer has been going on year after year. Plainly, the vested quarters involved in hollowing out the economy in this manner have deep connections within the system. Worse still, their networks extend across national borders. The international tax watchdog's report makes it patently clear that the reach of the global corporates and the private individuals involved in the tax scam is all-pervasive. They are too powerful for the governments of many developing and least developed countries (LDCs) to be properly dealt with. And they can make the tax laws of their host economies to serve their purpose. These superrich international corporate behemoths and the tax haven operators actually influence the global tax system in such a way that ultimately it gives priority to their interests. In consequence, annually the world's tax money worth over US$427 billion is sucked into the black hole created by the global corporate mafia and private tax evaders. Understandably, as a developing economy, Bangladesh needs to be extra cautious about the vulnerability of its Foreign Direct Investment (FDI) inflow channel to this nexus of corporate tax fraudulence.

Notably, manipulation of the transfer pricing system in import and export is a potential source of tax evasion. In the face of the all-powerful corporate tax abuse and offshore tax evasion, Bangladesh will need to revisit and revise its prevailing tax system. To contain tax abuse and money laundering, the National Board of Revenue (NBR) is learnt to have set up a transfer pricing cell for its customs wing recently. Belated though, it is no doubt a praiseworthy move. More importantly, bolder steps at the policy level of the taxation system would be necessary to face up to the powerful tax abusing quarters.

 

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