DTAAs prove obsolete in fighting fund flight

A government move is underway to review and update the relevant international treaties with different countries as the instruments proved obsolete in dealing with external trade and vices like capital outflow in the digital era, officials said.
They said the urgency of revisiting the deals, known as Double Taxation Avoidance Agreement (DTAA), was felt after the revenue authority had failed to receive any response to queries from the partner countries regarding siphoned wealth of the Bangladeshis.          
It was then found out that these deals are decades-old and devoid of necessary provisos applicable in the present-day context. The instruments need a review to ensure exchange of information relating to money laundering and cross-border transaction.
Officials at the National Board of Revenue (NBR) said the board has decided to review the DTAAs signed before the 1990s with the major countries and trade partners of Bangladesh.   
The government's revenue authority already has contacted the Netherlands, Switzerland and some other countries for the update on the treaties with them.
A senior NBR official said Bangladesh has such deals with a total of 32 countries with the provision of protecting interests of both the parties.
"DTAA is a deal between two countries seeking to avoid double taxation by defining the taxing rights of each with regard to cross-border flows of income and providing for tax credits or exemptions to eliminate double taxation," says the Income Tax Policy.
Such a treaty mainly focuses protecting the citizens of a country from paying tax twice in their home country or the other country, the official said.
It also has provisions of 'exchange of information' between treaty partners regarding evasion of tax, he said.
Some of the provisions of the DTAAs are found favouring the developed nations while least-developed countries' interests got ignored, the official added.
Currently, countries follow the model of the United Nations Organisation for Economic Cooperation and Development (OECD) in signing DTAAs.
Bangladesh has DTAAs with Belarus, Belgium, Canada, China, Denmark, France, Germany, India, Indonesia, Italy, Japan, KSA, Malaysia, Mauritius, Myanmar, the Netherland, Norway, Pakistan, the Philippines, Poland, Romania, Singapore, South Korea, Sri Lanka, Sweden, Switzerland, Thailand, Turkey, the United Arab Emirates, the United Kingdom, the United States and Vietnam.  
Of the countries, agreements with Belgium, Canada, France, Germany, Italy, Malaysia, Pakistan, Romania, Singapore, South Korea, Sri Lanka, Sweden and the United Kingdom were signed in or before 1990.
Those signed before 1990 did not include many issues related to money laundering and information sharing which are emerging in recent times. Also, there was physical infrastructure needed back then for operating a business which now can be run virtually, sans any business establishments.  
Earlier, the NBR had sought information of the second-home owners of Bangladesh in Malaysia and names of those who deposited money in Swiss banks and made investment in the UAE. But, Switzerland, Malaysia and the UAE did not respond.
Officials said the existing DTAAs do not sufficiently empower the taxmen to seek information on capital flight and owners of 'second homes' from the foreign countries concerned.
The section on 'Exchange of Information' in the agreements needs necessary revision enabling the government to seek requisite information from the countries identified as potential zones for flight of undisclosed money from Bangladesh, taxmen said
Officials said information sharing can be facilitated through revisiting the DTAAs with the other countries with necessary updating.
Malaysia, Canada, the UAE and Switzerland have been identified as vulnerable zones for the flight of undisclosed money from Bangladesh.
Bangladesh signed the agreement with Malaysia in 1982.
The DTA deal with Canada came into effect in 1983. Canada has also been marked as the most popular destination for opulent Bangladeshis to stash in undisclosed funds.
Bangladesh signed the agreement with Switzerland in 2007 while with the UAE in 2012, the USA in 2006, the KSA in 2011, Singapore in 1980 and India 1992.
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