Too much arbitrary power will not help foreign investment

THE proposed national budget for the upcoming 2018-2019 financial year has created an opportunity for the National Board of Revenue (NBR) to impose income tax on transfer of shares of foreign companies having subsidiary in Bangladesh. If this system got approval from parliament, the NBR would get taxing rights over various forms of share transfer of a foreign company if it operates in any form in Bangladesh. The provision of taxation on share transferring of foreign companies operation in the country would fetch little income in the national exchequer but pose unwelcoming message to the foreign companies to invest in the country at the time when foreign direct investment virtually suspended. The policymakers should be cautious enough and calculative in devising such provision that derail potential foreign investment.
As per the Finance Bill 2018, the transfer of any share in a company that is not owned by a local resident shall be deemed to be the transfer of an asset situated in Bangladesh to the extent that the value of the share transferred is directly or indirectly attributable to the value of any assets in Bangladesh. Income through such transfers will be considered to have accrued or arisen in this country (Bangladesh). The NBR said that such a provision is an important taxing tool in international taxation, adopted by many developed and developing countries. If passed in parliament, the NBR would be able to claim income tax proportionately at various layers of share transfer, in any forms like merger and acquisition, if it has involvement directly or indirectly with Bangladesh operations.
Earlier, the NBR could not bring under tax net the share transfer of Bangladesh operations of Warid to Airtel in absence of legal coverage. The share transfer took place abroad between Indian telecom giant Bharti Airtel and Abu Dhabi Group, parent company of Warid Bangladesh. The NBR faced a similar problem when in May this year Chinese e-commerce giant Alibaba acquired e-commerce company Daraz Group, a subsidiary of Germany-based Rocket Internet, which also operates in Bangladesh along with other South Asian countries.