As per a report in The Financial Express printed on December 15, it is learnt that a customs wing "has detected numerous doubtful dealings in its initial scrutiny of trade-based irregularities". These are suspected by authorities to be linked to the siphoning off of foreign currencies. Over-invoicing on imports and conversely, under invoicing of exports has been a matter of much debate over the last few decades, and it is good to see that efforts are finally being made to detect, and hopefully, bring to book those involved in the irregularities.
Economists and tax authorities have long suspected that this practice of over-invoicing and under-invoicing in trade has been a means to launder money outside the country. Now that the Risk Management Unit (RMU) of Customs wing of the revenue board is trying to work, one can only hope that efforts will not stop at mere detection; rather concrete steps will be taken against those who flout the rules and take advantage of bonded warehouse facilities. Allegations have been raised against a number of businesses that are entitled to bond facility for import purposes. Apparently, goods imported by these entities are of higher value than those of commercial importers. How so? Why would there be two different sets of prices for the same product?
The fact that the national board of revenue (NBR) had formed RMU to detect companies suspected of tax evasion was a step in the right direction. Compilation of the database of risky companies needs to be expedited. The procurement of the requisite software for analysing data should not be delayed, particularly at this time of economic troubles where the NBR is having trouble collecting taxes (thanks partly due to the general economic downturn).
While it is certainly commendable that NBR is making a list of risky companies, it should also make another list of companies that are trusted, as pointed out by a former president of DCCI (Dhaka Chamber of Commerce and Industry). Of course these lists, both positive and negative, need to be reviewed periodically to make sure the database stays updated and relevant. The issue of compliance needs to be an ongoing process. As stated before, risky companies need to be taken to task for tax evasion and/or money laundering activities. Similarly, companies that have a good track record should not be caught up in any wild witch hunt.
While the Customs Act, 1969, states in very clear terms what customs can and should do, it is only now that steps are being taken to empower the body to act on suspected illicit transactions (better late than never). By one estimate, the RMU would require an allocation of "Tk220 million to procure software from local companies and for other preparations." Interestingly enough, the original RMU formed back in 2012 failed to be effective, primarily because, the unit lacked a proper organisational structure and requisite staff, and did not have a policy framework to carry out its activities.
Learning from the past would be a good starting point. Reportedly, the revenue authority was supposed to modernise customs by 2013 but ultimately relevant policy guidelines, documentation, recruitment of personnel, etc. were not finalised within stipulated timeframes for reasons unknown. Nine years have elapsed and one may only wonder why RMU was not made effective. It is simply inexplicable. Now that the cat is out of the bag with regards to very public news of thousands of crores of Taka being siphoned off from a particular bank and balancing the national budget becoming increasingly difficult, news about RMU resurfaces from hibernation. It is high time that authorities act professionally to rein in on crony capitalism that threatens to turn the economy on its head. Tk220 million in 2013 may well have mushroomed to Tk500 million in 2022, but there is hardly an excuse not to implement the project. Think of the billions of Taka in unpaid taxes and many more billions of Taka laundered abroad. This is public money that is not ending up in the national exchequer, but in the pockets of individuals and businesses and this has been going on for decades.
Financial integrity needs to be reinstated for the survival of the State and for that to happen money laundering has to be tackled head on. Unfortunately in Bangladesh, a crisis is only a crisis when we reach a rock bottom situation. This happened in the case of our energy sector planning. It may happen with the state of finances too, unless the powers-that-be take notice of what is going on in plain sight. Precisely how does the government intend to increase revenue if these loopholes remain in place? It is not as though the revenue authority has taken necessary steps to widen the tax net to bring in the millions of people who should be paying taxes but are not. Since that has never gained any traction with any government, one is left to plug the holes in the system, if one is least bit interested to stop money laundering and/or get what is owed to the revenue authority.
