Stringent law soon to prevent money laundering, misdeclaration

The government has moved to impose a 50 percent penalty on misdeclaration of exports, imports and investments in overseas countries, according to finance ministry officials.

Finance Minister AHM Mustafa Kamal is likely to announce the measure on Thursday while placing the national budget for fiscal year 2020-21 in parliament.

Sources at the revenue board have confirmed that such an announcement is coming in the next budget to prevent money laundering done through under-invoicing and over-invoicing – plus increase revenue collection.

According to the proposed law, importers, exporters or investors will be taxed at 50 percent if revenue officials find any money in excess of the declaration to the NBR. The revenue authority believes that it will be possible to collect several thousand crores of taka a year through this.

Former NBR chairman Mosharraf Hossain Bhuiyan sees this as a positive initiative to increase revenue collection.

He told The Business Standard, "Every year a large amount of money is siphoned out of the country through under-invoicing and over-invoicing. Businessmen bring in high-duty products declaring they are low-duty products. If a provision is added to the law, this can be controlled. This will increase the revenue collection by several thousand crores of taka a year. "

According to sources at the NBR, in December 2019, the Star Alliance in Dhaka's Gulshan announced the import of sweetcorn and kidney beans worth Tk7 lakh. Four months after the announcement, the company imported energy drinks, chocolates and wafers worth around Tk1 crore. According to the customs law, officials collect the duty on the imported goods as a penalty and then release the goods.

Instead of importing 23,500 kilogrammes of yarn from China on January 27 this year, sandbags were found in the containers. It had been announced that yarn worth $49,697 was being imported in these containers. The company laundered a large amount of money through this invoice.

Since 2015, the Crescent Group has exported leather goods worth Tk1,304 crore to Hong Kong and Thailand. Banks paid the company in cash by buying the export bills. However, the export money did not come back even after the specified time.

Like all these incidents, the NBR believes that several thousand crores of taka are being siphoned out of the country – in imports and exports – through over-invoicing and under-invoicing every year. However, the NBR does not have any specific information in this regard.

No other organisation has any statistics about how much money is being laundered from Bangladesh through over-invoicing and under-invoicing.

According to a report by Global Financial Integrity (GFI), a US-based international organisation, more than $11.5 billion was laundered from Bangladesh in 2015 – which is equivalent to Tk98,000 crore.  

It said that this mainly happened through over-invoicing and under-invoicing during the imports and exports. In this process, Tk530,000 crore has been siphoned out of Bangladesh in 10 years from 2006-2015, the organisation said.

A study by the Bangladesh Institute of Bank Management in 2019 found that 80 percent of the money is laundered abroad during the import and export of goods and services.

The report said money was being laundered through over-invoicing during the import of items with low duty – especially in the case of capital parts, industrial raw materials and spare parts. Again, to get government incentives, higher prices are being shown on export products.

Although the new initiative has been taken to curb money laundering, economists are fearful of harassment of businessmen.

Ahsan H Mansur, executive director of the Policy Research Institute, said there would be complications in product valuations. The price of the product fluctuates on the international market. Just three months after the opening of an LC for importing goods worth Tk500 crore, the price may go up to Tk800 crore.

"Under the law, the NBR will be able to impose 50 percent tax on an additional amount of Tk300 crore. That would be a terrible injustice," he added.

However, he said if the work could be done with caution and stop under-invoicing and over-invoicing, it would be helpful for the economy.