Sri Lanka bolsters tax audits of multinationals, transfer pricing
ECONOMYNEXT – Sri Lanka’s revenue authority has asked for aid from an international tax audit and compliance initiative that aims to prevent tax dodging and transfer pricing abuses by multinationals and improve collections.
The Tax Inspectors Without Borders (TIWB) initiative has already helped the Inland Revenue Department to reduce cross-border tax avoidance and collect taxes due from multinational enterprises in the island, a report said.
A joint initiative of the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP), it aims to boost domestic revenue mobilisation by improving tax auditing and tightening compliance efforts across Africa, Asia, Europe, Latin America and the Caribbean.
The IRD has now asked for a full TIWB programme to build effective international tax auditing skills, particularly in transfer pricing, and to prevent tax base erosion and profit-shifting, known as BEPS, after the success of the initial project.
The TIWB programme deploys qualified experts in developing countries to strengthen their ability to effectively tax multinational enterprises, boosting domestic revenue mobilisation.
Audits mainly deal with different issues of transfer pricing and international taxation including permanent establishment, validation of management and service fees, and the valuation of intellectual property.
Audits cover a cross section of industry sectors, such as tourism, important for small island states, as well as telecommunications, mining and hydrocarbons where multinational companies usually dominate.
TIWB provides a significant return on investment with over 100 US dollars in additional tax revenues recovered by host administrations for every one dollar spent on TIWB operating costs between 2013 and 30 April 2018 on average, the UNDP report said.
"Tax Inspectors Without Borders is delivering excellent value for money, and while the immediate impact on revenues is important, we are even more excited about the long-term
positive outcomes," said TIWB Head of Secretariat James Karanja.
"The transfer of skills now underway is driving organisational change in tax authorities worldwide, which will prompt much great taxpayer compliance in the future. We are developing a model for systemic change that puts developing countries in the driver’s seat for better using taxation to raise the revenues so badly needed for economic and social development."
(COLOMBO, 11 Octber, 2018)