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https://www.dhakapost.com/economy/135071

আমদানি-রপ্তানির প্রধান বাধা এনবিআর

জ্যেষ্ঠ প্রতিবেদক

১৪ আগস্ট ২০২২, ০১:৫০ পিএম

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আমদানি-রপ্তানির প্রধান বাধা হিসেবে এনবিআর ও কাস্টমসকে দায়ী করেছেন বাংলাদেশ নিটওয়্যার ম্যানুফ্যাকচারার্স অ্যান্ড এক্সপোর্টার্স অ্যাসোসিয়েশনের (বিকেএমইএ) নির্বাহী সভাপতি মোহাম্মদ হাতেম। রোববার (১৪ আগস্ট) ঢাকা চেম্বার অব কমার্স অ্যান্ড ইন্ডাস্ট্রির (ডিসিসিআই) আয়োজিত সেমিনার তিনি এ কথা বলেন।

ডিসিসিআই অডিটোরিয়ামে বেসরকারি খাতের দৃষ্টিতে ২০২১-২২২ অর্থবছরের দ্বিতীয় প্রান্তিকে (জানুয়ারি-জুন ২০২২) বাংলাদেশের অর্থনীতির সামগ্রিক পর্যালোচনা শীর্ষক সেমিনার অনুষ্ঠিত হয়। সেমিনারে ডিসিসিআই সভাপতি রিজওয়ান রাহমানের মূল প্রবন্ধ উপস্থাপন করেন।

হাতেম বলেন, অত্যন্ত দুঃখের সঙ্গে জানাতে হচ্ছে, আমাদের আমদানি-রপ্তানির প্রধান বাধা হচ্ছে এনবিআর ও কাস্টমস। আমাকে প্রায় প্রতিদিনই চট্টগ্রাম কাস্টমস, ঢাকা কাস্টমস ও উত্তর-দক্ষিণের কাস্টমসের কমিশনারকে ফোন দিয়ে ব্যবসায়ীকে উদ্ধার করতে হয়। নানা অজুহাতে গাড়ি ও পণ্য আটকে রাখা হচ্ছে। এই জ্বালাতন কেন হবে? অপকর্ম যারা করেন তাদের ধরেন। অপকর্মকারীদের ধরেন, দৃষ্টান্তমূলক সাজা দেন। আমাদের আপত্তি নেই। বন্ড অপব্যবহারকারীদের সাজা দিয়ে সারাজীবনের জন্য বন্ধ করে দেন, আপত্তি নেই।

সেমনারে পরিকল্পনা মন্ত্রণালয়ের প্রতিমন্ত্রী ড. শামসুল আলম প্রধান অতিথি ও এফবিসিসিআই’র সাবেক সভাপতি মো. শফিউল ইসলাম বিশেষ অতিথি হিসেবে উপস্থিত ছিলেন।

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https://www.tbsnews.net/bangladesh/crime/man-held-allegedly-laundering-around-tk1400-crore-476922

TBS Report 

14 August, 2022, 02:40 pm

Last modified: 14 August, 2022, 02:49 pm

Man held for allegedly laundering around Tk1,400 crore 

Md Shahidul Alam, accused in total 29 money laundering cases, was arrested from the Dhaka airport 

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Md Shahidul Alam. Photo: Courtesy

The Customs Intelligence and Investigation Directorate (CIID) has arrested a man for allegedly laundering Tk1,396.14 crore.

CIID nabbed Md Shahidul Alam, 56, from the Hazrat Shahjalal International Airport (HSIA) during a recent drive.

Shahidul, accused in total 29 money laundering cases, was trying to flee to Italy, reads an official press release issued in this regard on Sunday.

According to the release, the arrestee, along with his accomplices, used fake names, addresses, documents, trade licence, TIN, BIN, and IRC to import high-duty liquor, cigarettes, LED TVs, powdered milk, photocopiers, under false import permission of machinery.

The accused used four of his fake companies – Messrs AgroBD & JP, Henan Anhui Agro LC, Hebra Branco and China BDL – to evade huge sums of customs duty and launder crores of money, added the release.

Total nine cases were filed against Messrs AgroBD & JP for laundering Tk439.11 crore. Seven cases each were filed against Hebra Branco and China BDL for laundering Tk290.89 crore and Tk234.39 crore respectively.  

Whereas, six cases were filed against the accused's Henan Anhui Agro LC for laundering Tk429.11 crore. 

Shahidul was shown arrested in one of the cases filed with the Paltan Model police station back in 2019.

He was produced before a Dhaka court on Saturday. The court ordered him to be sent to jail after.

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https://www.tbsnews.net/economy/july-revenue-grows-16-customs-duty-483258

Reyad Hossain

24 August, 2022, 10:00 pm

Last modified: 24 August, 2022, 10:05 pm

July revenue grows 16% on customs duty 

Economists said hike in the prices of imported goods and inflation were the main reasons behind the increase in year-on-year revenue collection in July

The pace of income tax and value added tax (VAT) collection in July of this fiscal year was slow, but the overall revenue collection increased by around 16% due to almost 38% growth in customs duty collection in that month.

Economists said hike in the prices of imported goods and inflation were the main reasons behind the increase in year-on-year revenue collection in July.

Besides, the import of some products – mainly commercial products with high tariffs – increased slightly in July, said the National Board of Revenue (NBR) officials.

They said customs duty collection increased significantly because many importers were waiting without taking delivery of imported goods to see what happens in the month of budget declaration. As those goods were cleared in July, revenue for them was collected in that month.

Besides, there was a negative growth in customs duty collection in July of FY22. As a result, the growth rate appears higher in the same month of the current fiscal year, compared to the last one. 

Towfiqul Islam Khan, senior research fellow of Centre for Policy Dialogue (CPD), told The Business Standard, "The growth in import duty and VAT is mainly driven by inflation. Hiked prices increased the consumers' expenditure, which in turn increased collection import duty and VAT collections. 

He further said, "The NBR is reluctant to increase revenue collection by increasing efficiency. If it could do so, the tax on some commodities like fuel could be reduced to give relief to consumers."

Sources at the NBR said they collected a little over Tk17,700 crore as customs duty, VAT and income tax in July, which is around Tk3,000 crore less than the target for that particular month.

About Tk31,000 crore has to be collected every month on an average to meet the target of Tk370,000 crore revenue in FY23.

According to sources, the NBR is looking for reasons behind zero growth in income tax collection in July this year.

NBR Chairman Abu Hena Md Rahmatul Muneem will hold a meeting with field level officials today to review the revenue collection situation.

On condition of anonymity, a senior NBR official told TBS that the pace of revenue collection has always been a little slow in the first month of the fiscal year. Besides, there is a pressure to collect more taxes in June to achieve the target of the outgoing fiscal year, which is one of the reasons behind the decrease in revenue in July – the first month of the new fiscal year. 

Muhammad Abdul Majid, former chairman of NBR, told TBS, "Increase in import of some products can be a reason behind the increase in customs duty collection in July, but we have to wait two or three more months to understand whether the import is actually increasing, and which way the trend of revenue collection is going."

According to NBR data, the growth in revenue collection was 4% in July of FY22. In that month, there was a negative growth of 2% in customs duty, 1.37% growth in VAT and 15% growth in income tax collection.

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https://www.tbsnews.net/economy/ctg-customs-sees-425-growth-july-revenues-469450

TBS Report 

01 August, 2022, 09:35 pm

Last modified: 01 August, 2022, 09:35 pm

Ctg customs sees 42.5% growth in July revenues

The collection of Tk4,839 crore is also around 8% higher than the monthly target set this fiscal year

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The Chattogram Custom House has registered a 42.56% growth in revenue for July, the first month of fiscal year 2022-2023, relative to the same time last fiscal year, amid a volatile dollar market and other global crises caused by the ongoing Russia-Ukraine war. 

It collected some Tk4,839 crore in July, which is also around 8% higher than the Tk4,482 crore target set for the month this fiscal year. 

In the corresponding month of the previous fiscal (FY22), the House collected some Tk3,395 crore in revenues. 

"The Chattogram Custom has started the new fiscal year with a 42.56% growth in July relative to July of the last fiscal year. It is obviously great news for the country's economy," Joint Commissioner of the house, Salahuddin Rizvi, told The Business Standard. 

Following a proper Harmonised System (HS) of codes and collecting duties based on product values were the key drivers of the growth, he added. 

Salahuddin Rizvi hopes the growth trend will also continue in the coming days of this fiscal year. 

The Custom House collected some Tk59,160 crore in revenue in the previous fiscal (FY22). The target for the ongoing fiscal has been set at Tk74,206 crore. 

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https://www.tbsnews.net/nbr/nbr-fears-revenue-loss-if-project-implementation-slows-483986

TBS Report

25 August, 2022, 10:00 pm

Last modified: 25 August, 2022, 10:03 pm

NBR fears revenue loss if project implementation slows

The NBR chairman has ordered tax officials to increase field level supervision to increase revenue collection

Slowing the implementation of less important projects in the current fiscal year might have a negative impact on revenue collection, fears the officials of the National Board of Revenue (NBR).

The government has decided to slow down implementation of less important projects to cope up with the decline in the country's dollar reserve.

Besides, collection of value added tax (VAT) from large taxpayers is not going on as per expectations, which was discussed yesterday at a meeting of tax officials presided over by NBR Chairman Abu Hena Md Rahmatul Muneem at the Rajaswa Bhaban in Segunbagicha, Dhaka.

The NBR chairman has ordered tax officials to increase field level supervision to increase revenue collection, said sources present at the meeting.

On condition of anonymity, an NBR member present at the meeting told The Business Standard, "Government expenditure will drop if the implementation of less essential projects is slowed down in the current year. The government used to collect the VAT deducted at source from the material suppliers of these projects. There is a concern that the amount of VAT collected in this way might decrease this year."

According to sources, the issue of drop in VAT collection from a number of large taxpayers including the cigarette companies was also discussed in the meeting.

The NBR aims to collect Tk3.7 lakh crore revenue in the current fiscal year. About Tk1.37 lakh of that amount will be collected as VAT.

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https://www.dhakatribune.com/business/2022/08/25/high-taxes-prevent-tourists-from-coming-to-bangladesh

High taxes prevent tourists from coming to Bangladesh

VAT and other taxes on hotels, motels, and goods associated with the tourism industry are much higher than those of other countries

 

Tribune Desk

August 25, 2022 3:24 PM

Current value added tax (VAT) and other high tax rates were found to be major obstacles to developing Bangladesh's tourism industry, a parliamentary body said on Wednesday.

VAT and other taxes on hotels, motels, and goods associated with the tourism industry are much higher than those of other countries. This is a major obstacle to attracting foreign tourists, said the parliamentary standing committee on civil aviation and Tourism Ministry.

In a meeting at Jatiya Sangsad, with Awami League lawmaker RAM Obaidul Muktadir Chowdhury in the chair, it was said the municipality and city corporation have started the process of collecting holding tax at a new rate and 5% tax from those staying in hotels or motels, which will directly hinder the industry's development.

In the meeting, Bangladesh Parjatan Corporation said tourism is one of the fastest growing sectors in the world. But in Bangladesh, taxes are levied at various levels, including service sub-sectors, such as hotels, motels, restaurants, and amusement parks.

In many cases, taxes are taken from service providers and receivers of the same service, meaning that double taxation is taking place, the organization said.

It was mentioned that Bangladesh Parjatan Corporation has to pay 15% VAT, 5% supply tax on purchased goods, and 5% on the revenue received.

Due to giving so much VAT and income tax in addition to paying salaries and allowances, the existence of the corporation has become impossible, the corporation added.

According to the committee, authorities should take an integrated approach to keep taxes at a tolerable level in all the related sectors, including the various service sub-sectors in the tourism industry.

The meeting recommended taking necessary measures by holding a meeting involving Dhaka north and south city corporations, the Finance Ministry and the National Board of Revenue.

About the obstacles in Cox's Bazar, lawmaker Obaidul said although the 24-hour security system has been beefed up in the location, there is no means of recreation at night, and that is why tourists usually stay in the hotel area.

The committee also recommended demolishing all old infrastructures in Cox's Bazar and building a modern tourist city.

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https://today.thefinancialexpress.com.bd/first-page/power-gas-users-paid-tk-31535b-taxes-in-5-fys-1661710770

Power, gas users paid Tk 315.35b taxes in 5 FYs

 DOULOT AKTER MALA |  August 29, 2022 00:00:00

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Industrial and domestic consumers of two basic utility services - electricity and gas - paid Tk 315.35 billion taxes to the public exchequer with their consumption charges during the last five fiscal years (FY 2017-18 to FY 2021-22).

The amount is equivalent to the tax revenue collection by the National Board of Revenue (NBR) from all the domestic and import sources in a month.

Economists said tax burden on end-users is higher in Bangladesh, as the existing provisions have less refund or rebate facilities, imposing 'tax-on-tax' on consumers.

According to the NBR data of consumers' tax collection during the last five FYs, the gas consumers paid the major amount of the taxes, as Value Added Tax (VAT) rate was 15 per cent on them.

The gas consumers paid Tk 252.13 billion VAT to the five state-owned gas companies. Bangladesh Gas Field Ltd, Sylhet Gas Fields Ltd, BAPEX, Rupantarita Prakritik Gas Co Ltd, and Petrobangla deposited the consumers' VAT to the public exchequer.

Besides, four power distribution companies collected Tk 63.22 billion VAT at a rate of 5.0 per cent since FY 18 for the public exchequer, the FE analysis found.

Rural Electrification Board (REB), Dhaka Power Distribution Company (DPDC), Bangladesh Power Development Board (BPDB), and Dhaka Electric Supply Company (DESCO) deposited the VAT to the NBR.

VAT collection from the gas consumers grew by 129.52 per cent last year. The power consumers also paid 1.57 per cent higher VAT last year, compared to that of the previous FY.

Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), said the VAT system is causing escalation of actual tax burden on the end-users.

There must be scopes to obtain VAT rebate, whether it is at uniform rate or not, except some cases - so that the consumers can enjoy the reduced rate.

Actual tax incidences sometimes increased to 35 per cent on the end-users, while 15 per cent is the highest rate of VAT in Bangladesh, he added.

A senior VAT official said they detected that some of the state-owned enterprises (SoEs), involved in providing utility services, are spending their collected VAT for other purposes, violating the VAT law.

Such trend has caused accumulation of a huge amount of arrear VAT lying with the SoEs.

"Consumers are paying VAT with their gas or electricity bills, but it is not properly deposited to the public exchequer in due time."

A huge amount of outstanding revenue with the SoEs is one the main reasons for missing the annual tax collection target, as the target is fixed by estimating collections from these sectors too, he added.

Farid Uddin, former member of the NBR, said tax should be imposed at equal rates to all, irrespective of poor and rich, as per principle of the VAT law. But a question remains whether the country's economic situation supports it or not.

VAT is a regressive tax, which is also slapped on numerous commodities, used by the low-income group of people too - considering the country's internal revenue mobilisation, he noted.

VAT on utility services is refundable or adjustable for the industrial consumers, which manufacture goods. However, the end-users have no option to get rebate on their paid VAT on utility services.

Four power distributing companies paid VAT worth Tk 9.78 billion in FY 18 that jumped by 48.77 per cent to Tk 14.55 billion in FY 22.

Rural power consumers under REB paid Tk 1.34 billion VAT last year. However, their VAT payment declined by 35.44 per cent compared to that of the previous year.

Electricity consumers in some parts of Dhaka city and Narayanganj under DPDC last year paid 10.09 per cent higher VAT worth Tk 4.85 billion, while those under BPDB paid Tk 5.86 billion.

Consumer of DESCO, supplying power in major parts of the capital city and Tongi, paid VAT worth Tk 2.71 billion last year.

Of the gas companies, VAT payment by RPGCL and BGFL declined by 37.05 per cent and 4.40 per cent respectively in last FY.

The five state-owned gas companies paid Tk 32.39 billion VAT last year against Tk 11.11 billion in FY 21.

However, VAT collection from the gas companies was not consistent during the last five years, as cash-strapped Petrobangla failed to deposit VAT regularly on several occasions.

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https://www.tbsnews.net/bangladesh/govt-readies-strategy-recover-laundered-money-489102

Abul Kashem

02 September, 2022, 11:05 pm

Last modified: 02 September, 2022, 11:08 pm

Govt readies strategy to recover laundered money

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The government is working on a strategy to freeze or confiscate unreported offshore assets soon after their detection, according to a draft guideline awaiting approval of the finance ministry.

The next course of action will be an investigation jointly with countries to where the money has been syphoned off and initiatives for repatriation.

In case of a delay in getting court order to seize the assets, the government via the Bangladesh Financial Intelligence Unit will send a letter of rogatory – a formal request from a court to a foreign court for judicial assistance – to the countries concerned so the laundered money cannot be transferred to another country, according to the guideline on legal framework and strategic process for laundered asset recovery.

The government thinks such plans of action will weaken a money launderer financially, psychologically and socially, and will also limit their ability to influence investigation, which will lead to a prompt and proper investigation.

In the FY23 budget, the government had offered Bangladeshis a scope for legalising their unreported movable assets abroad if repatriated to Bangladesh, subject to paying a 7% tax. But no one has availed this offshore tax amnesty yet.

And, as part of the government's coordinated and effective initiatives to bring back the laundered money, six agencies engaged with checking money laundering such as the Anti-Corruption Commission, the Bangladesh Financial Intelligence Unit, the Criminal Investigation Department, the Bangladesh Securities and Exchange Commission, the Customs Intelligence and Investigation Directorate, and the Department of Narcotics Control have jointly prepared the draft guidelines.

The working committee – constituted for formulating and implementing policies on prevention of money laundering and terrorist financing – has already given its go-ahead to the guidelines, which was forwarded to the finance ministry on 11 August for its seal of approval as well. Later, the draft strategies will be submitted to the national coordination committee on preventing money laundering and combating financing of terrorism, headed by the finance minister, for its consent.

The government has no data on how much money is laundered abroad every year. But according to the US-based think-tank Global Financial Integrity, Bangladesh lost a whopping $49.65 billion or around Tk4,71,675 crore on an average between 2009 and 2015 (except the year 2014), mainly to trade misinvoicing and under-invoicing. On an average, around Tk84,475 crore was syphoned off the country each year during the period.

Bank accounts of many launderers were seized and cases were filed against them under the Money Laundering Prevention Act, but there had been only two instances of bringing the money back since independence.

One was the Tk21 crore, laundered by BNP Chairperson Khaleda Zia's youngest son Arafat Rahman Koko, brought back from Singapore. Besides, of the $81 million stolen from the Bangladesh Bank's reserve, $150,000 from the Philippines and $20 million from Sri Lanka were retrieved as well.

Ghulam Rahman, who was the chairman of the Anti-Corruption Commission when Koko's laundered money was recovered from Singapore, told The Business Standard that the Singapore government and its court had helped Bangladesh a lot in retrieving the money.

Mentioning that Bangladesh's money is mainly laundered to Dubai, Canada, the United States, Australia, Malaysia, Hong Kong and Singapore, he said, "We have to make a bilateral agreement with those countries to repatriate our smuggled money."

When contacted, ACC lawyer Khurshid Alam Khan said, "Switzerland does not provide us with any information on Bangladesh citizens' funds in Swiss bank accounts as there is no bilateral agreement with the country."

Ghulam Rahman said, "We will be able to bring back laundered money following the draft strategies if we ensure an inter-agency coordination."

But it will be difficult to bring back the undisclosed money kept in tax haven countries that will not cooperate much in this matter, he also said.

In the assessment of the Asia Pacific Group on Money Laundering, Bangladesh's legal and institutional framework is of international standards, but it has not been successful in recovering money laundered abroad.

Bangladesh has made many requests for legal assistance to some countries to retrieve the unreported offshore money, but legal processes of those cases now hang in the balance owing to no response for a long time, according to the draft guidelines.

However, according to the ACC's annual reports for 2020 and 2021, the shares of two companies in Dubai and five bank accounts in Malaysia were seized in connection with money laundering following court orders in 2019. Besides, in2021, the ACC froze 21 bank accounts in Canada, 24 in Australia and five in Singapore.

In its annual reports, the ACC said, "The commission is also chasing holders of illegal assets abroad. It is fulfilling its legal responsibility to ensure that no one enjoys money earned beyond known sources of income."
 
Seizure of assets before conviction

The government will go for non-conviction based confiscation, meaning that it will confiscate laundered assets even before criminal charges are proven in court as the prosecution takes a lot of time, money and effort. Many countries are following this approach. 

If it follows a typical method – first, proving laundering charges in court, then confiscating assets and finally repatriating those, there will be many more complications in the process but a low success rate.

Bangladesh will also form a joint investigation team or taskforce, comprising all relevant agencies or competent persons, to bring back money or assets smuggled abroad. Considering the nature and sensitivity of each case, the investigation team will conduct a joint investigation with foreign authorities if necessary.

The guidelines also state that financial intelligence officers and financial sector experts should be involved at all stages of a money laundering investigation for coordination among the parties concerned from the beginning of a case.

According to the draft guidelines, it is not possible to bring back the money without the maximum cooperation of the countries where the money has been laundered to. In this regard, the government will take assistance from the International Centre for Asset Recovery, the Star Protection Agency and the United Nations Office on Drugs and Crime. 

Besides, the government will give priority to getting mutual legal assistance in countries, such as Switzerland, where access to informal information is limited.

Getting foreign government assistance in recovering laundered money depends largely on the capability of the Ministry of Foreign Affairs, the guidelines also noted.

In the case of the accused is absconding and no charge of criminal offence can be framed against them or if the accused dies before conviction, their assets will be confiscated before they are convicted.  

The same asset forfeiture approach will be applicable if the accused is so powerful that it is impractical to frame a criminal charge against them or if assets are transferred to a third party who is not interested in participating in the hearing against the confiscation of the assets or if it is not possible to collect evidence to prove the offence in a criminal court. 

Former ACC chairman Ghulam Rahman said, "We have to maintain international standards during trial proceedings to repatriate laundered money."

The tracking should be completed fast, otherwise, launderers will move their assets to another country, he added.
Syphoning legally earned money or assets out of the country is a crime according to the law of Bangladesh, but not in laws of many countries, the guidelines said.  

Besides, some countries, while sending back laundered money, make it a condition that part of it be spent on anti-corruption or other public welfare activities.

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https://www.tbsnews.net/thoughts/why-offshore-tax-amnesty-unlikely-work-490510

Tahreen Tahrima Chowdhury

05 September, 2022, 01:25 pm

Last modified: 05 September, 2022, 01:33 pm

Why the offshore tax amnesty is unlikely to work 

Bangladesh's recent offshore tax amnesty is unlikely to improve the depleted foreign exchange reserve, reverse capital outflow, or decrease corruption and money laundering

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Tahreen Tahrima Chowdhury. Sketch: TBS

The Bangladesh Bank has offered tax amnesty against the return of offshore assets by paying a 7% tax. On 18 July, a Bangladesh Bank circular stated that "any form of undisclosed offshore assets can be brought into the country legally through the banking channel between 1 July and 30 June 2023 by paying a 7% tax." 

Furthermore, it was reported that the source of funds to be remitted need not be declared. 

A plausible intention behind the Central Bank's initiative may be to combat the turmoil in the foreign exchange markets arising from scarcity of foreign exchange. 

However, the initiative is open to the criticism that it may permit legitimising illicit funds and eventually act as a disincentive for honest taxpayers. On the other hand, the initiative can also be viewed as a mechanism for encouraging emigrants to bring back their financial assets and savings through legal channels. 

Nevertheless, this may not be effective since the income earnings through legal channels by Bangladeshi nationals in foreign countries can already be transferred to Bangladesh in the form of tax-exempt remittance. Therefore, Bangladeshis who have earnings and assets abroad may not find this 7% tax amnesty to be a lucrative incentive.

Considering the sudden decline in foreign exchange reserves, it is imperative to stabilise the foreign exchange market as soon as possible, but the options available to the policy makers are limited. In light of this, the tax amnesty provided by the government can still be viewed as a well-intentioned initiative. This is a crucial concern at present and it is essential to assess its likely effectiveness, since it is by no means certain, ex-ante, that money launderers will be inclined to send back their illicit financial resources from abroad. 

Prior to the offshore tax amnesty, the government provided a tax amnesty to undeclared domestic earnings several times since independence, but tax revenues through such programs have not increased significantly. 

The percentage of income tax collected from domestic sources as a result of the amnesty compared to the overall collection was not satisfactory: 6.81% in 2007-08 which then fell to less than 1% in FY 2008-09 and FY 2009-10 (0.72% and 0.70% respectively) (Ahmed 2020).

Given the dismal outcome of the tax amnesty on domestic revenues, it is unlikely that the outcome of tax amnesty initiatives on offshore resources will be effective.

Let us consider some facts and issues to assess this concern. It is well known that illicit transfers through illegal channels take place in large amounts. It should be obvious that only individuals and firms with high incomes can avail themselves of such opportunities (cf. Alstadseter et al, 2018).

The Global Financial Integrity Report (GFI, 2021) states that funds are illicitly transferred across international borders "to evade taxes and/or customs duties, launder the proceeds of criminal activity, circumvent currency controls, and hide profits in offshore bank accounts."

If such transfers are indeed meant to evade taxes and trade duties to begin with, the likelihood of reversing capital outflow by means of the offshore tax amnesty seems low.  

It is difficult to estimate the magnitude of illicit financial flows due to its covert nature. GFI carried out this task by examining the latest international trade data, officially reported by governments to the United Nations, by estimating the magnitude of trade misinvoicing. 

GFI calculated the "value gaps" occurring in the global commercial trading system by identifying the "mismatches between what any two countries had reported regarding their trade with each other." 

The annual average total value gap identified in Bangladesh's trade is about $8.3 billion between 2009 to 2018, and amounts to approximately 17% of total trade of Bangladesh (GFI 2021 Report), which also reveals the magnitude of capital flight every year. 

Trade misinvoicing and balance of payment leakages are two channels for illicit financial flows in the developing world. Illicit financial outflows through trade misinvoicing and balance of payment leakages account for 12-17%  of Bangladesh's total trade from 2005 to 2015, of which trade misinvoicing is around 7-12% of Bangladesh's total trade (GFI, 2017). 

Hence, trade misinvoicing is the largest component of illicit financial flows in Bangladesh. 

Against this backdrop, even if the central bank's ambitious approach of tax amnesty functions as intended, and if there is substantial inflow of foreign currencies resulting in significant augmentation of foreign exchange reserve, the shortage of the reserve will be addressed to some extent in the short-run but there is unlikely to be a significant effect in the long-run. 

The currency depreciation has been large and in a short span of about six months it has increased the incentive to resend funds which were transferred since early this year.

However, the present scenario is somewhat different from the previous years. For example, if the funds were transferred when the exchange rate was Tk87 to the US dollar, it could be brought to Tk95 in a short span of time — a high rate of return. 

And, if the benefit of the tax amnesty is included, the return would be even higher. Individuals may be induced to utilise the high return of this short-term capital inflow in significant part to make long-term investments in unproductive real estate assets in the absence of well-structured investment opportunities.

A thriving "hundi" or curb market makes Bangladesh's capital account more open than the policy regime suggests. This implies that foreign exchange traders can drive up the value of the Taka via curb market activity, and at a certain stage drive it back down again, depreciating it.

While such behaviour would normally be expected in an open capital account with a floating exchange rate and market competition, the ups and downs would not disrupt the market given strong monetary and fiscal policies and regulation. However, with weak policies and regulation, it can cause turbulence and yield windfall gains of the sort observed recently.

It is high time the government resolutely strengthened regulatory control as well as executed stern actions against the unscrupulous "money changers." Otherwise, the ability of a relatively small group of traders to cause large swings in the exchange rate can cause greater disruption in the future. The stock market crashes of 1996 and 2012 should serve as reminders.

References

Ahmed, Sams Uddin. "Tax amnesty schemes in Bangladesh: Some observations." The Cost and Management 48, no. 3 (2020): 35-40. 

Alstadsæter, Annette, Niels Johannesen, and Gabriel Zucman. "Tax evasion and inequality." American Economic Review 109, no. 6 (2019): 2073-2103.

Integrity, Global Financial. "Illicit financial flows to and from developing countries: 2005-2014." Washington, DC (2017).

Integrity, Global Financial. "Trade-related illicit financial flows in 134 developing countries 2009-2018." Global Financial Integrity,(2021).

Tahreen Tahrima Chowdhury is a Research Fellow at the Bangladesh Institute of Development Studies (BIDS)

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https://thefinancialexpress.com.bd/economy/bangladesh/genex-infosys-appointed-for-vat-collection-for-three-years-1663159260

Genex Infosys appointed for VAT collection for three years

The firm to install 0.30m VAT collecting machines in Dhaka, Ctg

Published:  September 14, 2022 18:41:00

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Genex Infosys Limited, a leading IT service provider, will provide and install 300,000 VAT collecting machines in Dhaka city and its adjoining areas as well as in Chottagram city in the next three years.

Cabinet Committee on Government Purchase (CCGP) at a meeting on Wednesday approved a proposal of the National Board of Revenue (NBR) to select Genex Infosys as a vendor to collect value added tax (VAT) on behalf of the government.

Finance Minister AHM Mustafa Kamal presided over the virtual meeting while members of the committee attended it, reports UNB.

Genex Infosys was selected through an open tender, said the additional secretary of the Cabinet Division Abdul Barik while briefing on the decisions of the committee.

He said the Genex as a lowest bidder won the contract in three lots to supply and install Electronic Fiscal Device (EFD) and Sales Data Controller (SDC) or VAT collecting machines at different types of retail shops.

Earlier, the Cabinet Committee on Economic Affairs gave its nod in principle to this decision of NBR on August 31.

Barik said the vendor will supply and install the machines at its own cost and in return, it will get 0.52-0.538 per cent of the collected money as a service charge while depositing it to the government.

It will also carry out the operation and maintenance work as well, he added.

According to NBR officials, it’s not possible for the government to operate so many machines across the country, that’s why service outsourcing is being done.

However, installation of EFD machines started two years ago but there is not much speed in its operation.

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