Developing economies are increasingly hurt by the way global corporations exploit taxation differences and move profits to low-tax locations, according to an International Monetary Fund report Wednesday.

But few countries can protect themselves in a competition for direct investment that increasingly appears like a “race to the bottom” in setting corporate tax rates, the IMF said.

Moreover, companies are increasingly able to shift and relocate more intangible assets - like intellectual property - to avoid taxes.

The IMF said that the more countries give in to investors’ requirements on taxes, the more they are hurting the global community.

In addition, tax-cutting and legal tax avoidance by corporations are having an impact on countries’ fiscal strength, undermining their ability to fund government just at a time when many are fighting deficits.

Incentives are “significantly undermining revenue in developing countries,” the IMF said, noting that “overall fiscal performance is more vulnerable to pressures on these receipts.”

“The amounts at stake in a single tax-planning case now quite routinely run into tens or hundreds of millions of dollars. These sums may be small relative to total tax revenue in sizable advanced economies, but are large for the developing countries,” the report said.

That is especially the case in countries reliant on extractive industries like mining. Mining companies frequently load up on debt to reduce the tax they pay to the host country.

As important in denying countries tax receipts are corporate schemes like transfer pricing.

“Identifying the country that is the ‘source’ of income... is increasingly problematic,” the report said. “It has been made more difficult, conceptually and practically, by the increased importance of intra-firm transactions.”

It also said that companies increasingly exploit intangible assets like patents, trademarks, and other intellectual property “which can be much more easily relocated than can the bricks-and-mortar facilities of the world.”

The report showed how foreign direct investment is handled through low-tax locations as a strategy.

Half of outgoing direct investment from Brazil goes to havens like Austria, the Cayman Islands, and the British Virgin Islands, before it goes to the final destination. Two-thirds of outgoing direct investment from Russia goes first to havens like Cyprus and the Netherlands.

The IMF spelled out the need for a “global architecture” for taxation in the way that trade is increasingly governed by international treaties.

But it warned that fixes can bring their own difficulties in how taxable income might be apportioned.

The IMF report comes at a time when the issue of tax avoidance is strong even in the most advanced countries.

Some of the largest US companies, including Apple, Google, and IBM, have come under attack for stashing global profits in havens like Ireland to avoid higher taxes elsewhere.

News: Dhaka Tribune /June 29, 2014

Major (Retd) Dr. Md. Rezaul Haque has been re-elected Chairman of the Board of Directors of Social Islami Bank Limited.

The board of the bank in its 314th meeting unanimously extended the tenure of the current chairman for his dynamic and pragmatic leadership for visible growth of the bank, said a press release.

Major (Retd) Dr. Md. Rezaul Haque, a veteran freedom fighter actively participated in the liberation war as medical officer under sector head quarter No-1 at Harina Army Camp at Subroom in India. He received M.B.B.S degree from Chittagong Medical College under Dhaka University. After returning from liberation war he had served different units of Bangladesh Army as Army Medical Officer till 1978.

He also participated in Arab-Israel War at the Golan Heights of Syria in 1973 as a young captain of Bangladesh Army. On deputation from the Army, Reza also worked at Family Planning Directorate under Ministry of Health. In 1978, he went to the Kingdom of Saudi Arabia and served Ministry of Health of KSA for 22 years. While he was the Director of Chest Disease Hospital, Jeddah, he voluntarily retired from the service in 2002 and engaged himself in various social development and employment generating activities at home.

News: Daily Sun/June 29, 2014

Islami Bank Bangladesh Limited on Tuesday officially introduced Shariah compliant credit card ‘Khidmah’ at a local hotel in the capital. Md. Abul Quasem, deputy governor of Bangladesh Bank unveiled the card as chief guest. Islami Bank introduced this credit card with a view to providing investment facilities, fulfilling daily needs and enriching living standard to the limited income people. The card holders will be facilitated to purchase from all VISA bearing outlets, clear utility bill payment, traveling and e-ticketing.
Family members of the Khidmah card holders would be eligible for supplementary card without any additional fee.
The card has been classified into three categories- Silver, Gold and Platinum. The annual fee will be deducted for those Khidmah card holders who will consume up to two lakh taka annually.  
Deputy governor of Bangladesh Bank Md. Abul Quasem said, “Bangladesh Bank came up with a secured payment system to make transaction easier, faster and tech-dependent. Through this Khidmah card the circulation of the secured payment system will be heightened and popularized. ”
“Such types of cards are gaining popularity amongst the users, as such plastic money lessens the difficulty of carrying liquid cash. On top of that, the price charged will be less if the payment made via this card,” he added.
Congratulating IBBL Abul Quasem said, “Via this Khidmah card the banking services can reach the doorsteps of (more) the people. Khidmah card will play an important role in the fulfillment of general people’s needs.”
On the event executive director of Bangladesh Bank Dashgupta Asim Kumar, expressed his high hopes regarding the success of the Khidmah card.
Managing director of IBBL, Mohammad Abdul Mannan said, “Having more than 90 lakh customers IBBL is more concerned in the welfare of people rather than making profit”.

A file photo shows Bangladesh Bank headquarters in Dhaka. Bangladesh Bank on Monday raised the cash reserve requirement by 50 basis points to 6.5 per cent for scheduled banks to curb inflationary pressure on the economy, said officials of the central bank on Monday.

A BB official told New Age that the central bank would mop up around Tk 3,000 crore from the banks by increasing the CRR, also known as cash reserve ratio, as the banks had excess liquidity amid a dull business condition. Under the new rules, the scheduled banks will have to maintain 6.5 per cent CRR with the central bank from their total demand and time liabilities on a bi-weekly basis. The BB issued a circular to managing directors and chief executive officers of all banks in this regard asking them to maintain the new CRR ratio from today (Tuesday). The banks will have to maintain the CRR at 6.0 per cent instead of the existing 5.50 per cent on daily basis, but the bi-weekly CRR will have to be 6.5 per cent, according to the BB circular. The new CRR comes after a gap of more than three years and six months. The central bank last increased the ratio by 0.5 percentage points to 6.0 per cent on December 1, 2010. The central bank, however, unchanged the rate of statutory liquidity ratio (SLR) at 19 per cent. The BB official said that the central bank took the initiative due to increasing trend in excess liquidity in the banks amid sluggish business situation. ‘Besides, the inflationary pressure has recently increased. Due to the central bank move, the inflation may decline in the months to come as the BB will mop up huge amount of money from the market as part of its latest initiative’, he said. The country’s point-to-point inflation in May increased by 0.02 per cent to 7.78 per cent as consumer price index of some food items rose, according to the Bangladesh Bureau of Statistics data. The rate of inflation also increased by 0.32 per cent in May from that of 7.48 per cent in April this year. Due to the excess liquidity, the scheduled banks are now investing Tk 6,500 to Tk 8,000 crore with the BB’s every auction of Reverse Repo, he said. The banks invested Tk 6,927 crore with the rate of interest of 5.25 per cent in the Reverse Repo on June 19, according to the BB data. Economist AB Mirza Azizul Islam, who was a former finance adviser to the caretaker government, told New Age on Monday that the latest CRR policy would not put negative impact on the financial market as excess liquidity in the banking sector maintained an increased trend in the recent period amid sluggish business. The credit demand from the private sector is slow which pushed up the idle money in the banks along with the non-bank financial institutions, he said. Against the backdrop, the new CRR policy will help contain the inflationary pressure, Aziz said. Former BB governor Salehuddin Ahmed said the new CRR policy might slightly discourage the entrepreneurs due to contractionary money supply. The profitability of the banks will decline in the coming months due to the new rule, he said. Salehuddin said, ‘I have not found any solid ground for increasing the CRR right now as the new policy will not bring any major positive impact on the market.’ BRAC Bank managing director Syed Mahbubur Rahman said that the money supply in the market would decline due to the latest CRR initiative by the central bank.

Bangladesh Bank on Tuesday sent a letter to Swiss Financial Intelligence Unit expressing interest to sign a memorandum of understanding on exchanging information about money laundering. The BB took the move in a bid to collect information about money deposited by Bangladeshi citizens with the Swiss banks, said officials of the central bank. The recent data of Swiss National Bank showed that deposits by Bangladeshi citizens at various Swiss banks rose to Tk 3,236 crore (372 million Swiss francs) at the end of 2013, from Tk 1,991 crore in 2012. A BB official told New Age on Tuesday that the central bank earlier requested the Swiss Financial Intelligence to sign a MoU when Bangladesh became a member country of Egmont Group in July 2013, but the SFI was yet to make any response. BB executive director and spokesperson M Mahfuzur Rahman told New Age on Tuesday that the central bank had proposed again that the MoU should be signed between Bangladesh Financial Intelligence Unit of BB and Swiss Financial Intelligence Unit.