A UN body has urged international community to help develop a standard accounting system to stop multinational companies not paying tax.
'Adoption of globally consistent regulations for transfer pricing could encourage multinational companies to change their behaviour towards more transparency and accountability,' according to a United Nations Development Programme report released recently.
Under a standard accounting system, MNCs would report sales, profit and taxes paid in all jurisdictions in their audited annual reports, it suggested.
The report, , titled 'Illicit Financial Flows from the Least Developed Countries: 1990–2008' also revealed that dishonest exporters and importers, criminals, corrupt people and tax evaders sent $35 billion out of Bangladesh through illegal channels.
'Illicit fund flows from Bangladesh increased from $1.1 billion in 1990 to $4.5 billion in 2008 and the total illicit outflow is 3.41 percent of the country's gross domestic product,' it said.
According to the UNDP-commissioned paper, about 65 percent of illicit fund flows from LDCs are done through trade mispricing — imports are overpriced and exports underpriced on customs documents.
The report blamed corruption, uncongenial business climate, underground economy and political instability as the driving forces behind the illicit flows.
Trade mispricing accounts for a bulk of illicit outflow and tendency for mispricing has increased along with increasing external trade, says the report.
The UN body in its report, therefore, recommended systematic customs reforms and adoption of transfer pricing regulation to reduce illicit fund flows.
Implementation of specialised software to identify possible incidents of transfer pricing may also be useful, it suggests.
'Tax administration reforms and increased dependency in direct tax can be a good alternative to reduce tax evasion.'
Source : New Age
