Bhutan builds capacity of its tax officials in international taxation and transfer pricing as part of efforts to enhance domestic resource mobilization and drive attainment of the Sustainable Development Goals.
Improving tax revenue collection
August 9, 2022
Income Tax officials from the eight Regional Revenue and Customs Office and the Department of Revenue and Customs (DRC) Headquarters in Thimphu are attending a five-day training on international taxation and transfer pricing. The training started in August 2021 with virtual sessions amid COVID-19 restrictions. Over 25 virtual sessions were conducted from August 2021 to May 2022. The ongoing training is the first in-person training.
Transfer pricing refers to the mechanism by which cross-border intra-group transactions are priced. In itself, transfer pricing is a normal part of multinational enterprise (MNE) operations. For example, it allows MNE to determine which parts of the group are profit- or loss-making. However, if the method used to determine the price of such transactions, for whatever reason, does not reflect their true value, profits might effectively be shifted to low-tax or no-tax jurisdictions and losses and deductions to high-tax jurisdictions. This unfairly deprives a country of tax revenue, reducing the amount of resources available for funding its development objectives.
“Tax administrations across the globe are working to address the problems caused by transfer pricing. The situation is further complicated by the emergence of digitization in complex cross-border corporate transactions. Therefore, this training is timely and an eye-opener for Bhutanese tax officials,” said Gyeltshen, Officiating Director General of the Income Tax Division, DRC.
The training comes at a very critical juncture when Bhutan is redoubling efforts to enhance domestic resource mobilization, including through taxation amidst fast shrinking fiscal space, and transition to a more resilient and sustainable economy post COVID-19 crisis. It is part of the Tax Inspectors without Borders (TIWB) initiative that DRC has been implementing since June 2021 with the Indian Revenue Service (IRS) as the partner administration.
The Tax Inspectors Without Borders (TIWB) Initiative is a unique example of cooperation between two international organizations, UNDP and OECD. It draws on each other’s respective strengths in tax matters and developmental expertise as well as in-country presence, working together to tackle global challenges of tax evasion and illicit financial flows.
"Effective domestic revenue generation is at the heart of building back better and stronger. As a most reliable, stable and autonomous source of revenue and financing for the government, UNDP is very happy to support DRC, Ministry of Finance in their efforts to enhance domestic resource mobilization by strengthening tax administration and mobilization capacity,” said Azusa Kubota, Resident Representative, UNDP Bhutan.
Partnering with citizens for better public services
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