The luggage party: A hidden threat to our economy
The practice of bringing items into a country without declaring them to the necessary authorities is known as the "luggage party." In Bangladesh, this is a multidimensional problem that impacts many parts of the economy, including revenue collection, trade balance, and consumer safety. This practice is pervasive throughout the country and has a serious detrimental influence on Bangladesh's economy. The government's efforts to collect taxes are seriously threatened by this phenomena, which has grown to be a major issue in Bangladesh and compromises the credibility of governmental institutions, reads a press release.
High customs tax rates in Bangladesh, which range from 5% to 50%, make importing goods into the country expensive and hinder legitimate firms from operating. As a result, illicit market activities such as the luggage party have grown in popularity. The people like flight attendants generally travel to different parts of the world and purchase good such as cosmetics, dry foods, clothing, and electronics and so on in bulk before returning to Bangladesh in their suitcases. These commodities are then sold on the market at a lower price than regular businesses that must pay customs duties.
According to the press release, the impact of the luggage party on tax revenue collection is one of the most obvious adverse impacts. In Bangladesh, the value of unexplained imports is estimated to be roughly $5 billion annually, or around 2% of the nation's GDP, according to a World Bank assessment. Bangladesh, a developing country with limited infrastructure and resources, relies heavily on tax revenue to fund public expenditures such as infrastructure construction, healthcare, and education. Therefore, the country's overall economic growth and development may suffer significantly as a result of the luggage party's revenue losses.
Additionally, the luggage party creates an uneven playing field for companies doing business in the country. Compared to companies that operate in the informal sector, businesses that go by the law and pay taxes are at a competitive disadvantage. Some industrial participants are given an unfair advantage by this circumstance, which has the potential to alter the market environment. Additionally, it inhibits foreign investment in the nation, which restricts the entry of new competitors who do not want to compete on an unlevelled playing field.
The government's legitimacy and integrity are damaged as a result of the luggage party. People's faith in public institutions is damaged when the government fails to stop or solve tax evasion. The rule of law may be threatened as a result of this governance deficiency, which may also encourage organised crime and corruption. Additionally, taxpayers may be deterred from voluntarily fulfilling their commitments due to the perceived lack of credibility of the government, starting a vicious circle that makes the issue worse.
The luggage party also aids in the proliferation of fake goods and inferior products in Bangladesh. Businesses can import and sell counterfeit items in an unregulated atmosphere without adhering to safety regulations and quality controls. This situation could have a negative impact on public health and safety as well as the reputations of the country's legal businesses.
The luggage party also significantly affects the country's balance of trade. The International Centre for Trade and Sustainable Development found that the luggage party causes a rise in imports and a fall in exports, which has a detrimental effect on the nation's trade balance. The country's ability to engage in international markets and draw foreign investment may be limited as a result of this circumstance, which may also have long-term effects on the nation's economic progress.
The luggage party also contributes to the in formalisation of the economy, which could have a negative impact on working conditions and labour rights. Businesses can dodge labour protections and exploit workers in an uncontrolled environment, which results in unstable employment and low salaries. The growth of a competent workforce is further troubled by the informal sector, which ultimately reduces innovation and competitiveness.
To conclude, the luggage party has substantial harmful effects on the Bangladeshi economy, including loss of revenue for the government, unfair economic rivalry, a rise in the use of counterfeit products, and an underestimating of actual imports. Even if the government has taken action, more must be done to lessen the prevalence of customs tax evasion in Bangladesh. This problem might be resolved by lowering customs duty rates, cooperating with other nations to combat the sale of counterfeit products, and raising public knowledge of the luggage party's damaging effects. The government must act immediately to offset the damaging impacts of the luggage party and establish an environment conducive to the growth of legitimate businesses.
Md. Muzakkeerul Huda is an Associate Professor & Chairman at the School of Business of Presidency University