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Abuse of bond facility

CBC suggests change in ownership in foreign cos

Doulot Akter Mala | July 19, 2018 00:00:00


The Customs Bond Commissionerate (CBC) is for imposition of restriction on issuance of bond licence to the factories having cent per cent ownership of foreign nationals.

The CBC has submitted a proposal to this effect to the National Board of Revenue (NBR) to check abuse of the duty-free facility.

It has also suggested that 51 per cent local ownership in the foreign companies be made mandatory for getting bond licence.

The CBC suggested incorporation of an undertaking from the foreign investors into their wealth statements to ensure realisation of all the dues in case of tax evasion.

The commissionerate also suggested scrapping of the provision of allowing bond licence to the industries located in the residential and commercial areas.

The CBC has recently detected a number of loopholes in the existing laws that may cause revenue loss through the abuse of duty-free facility.

The findings include lack of required conditions for foreign investors, allowing companies for availing bond facility that are located in rented space, factories procuring used capital machinery from local sources, and absence of provision for the foreign investors to show asset and liability for getting bond licence, officials said.

As per the Bonded Warehouse Licensing Rules 2008, the customs authority has to consider the applications for bond licence from the foreign investors, who do not stay permanently in Bangladesh.

Also, the industrial units located in rented space or using age-old machinery procured from local sources can also apply for bonded warehouse licence.

In the proposal, the CBC highlighted risk in realising revenue from such industries in case of abuse of the duty-free facility.

The total tangible and intangible assets of these companies might not be equivalent to the claimed duties and taxes in case of such abuse, it said.

The commissionerate made the proposals after it found that realising due duties and taxes, in case of abuse of the bonded warehouse facility, would be difficult, if foreign investors have majority of shares in the companies concerned.

The CBC Commissioner Dr Alamin Paramanik submitted the proposals to NBR recently.

"The customs authority will be able to realise its unpaid duties and taxes from local partners, if they hold majority shares in the companies enjoying duty-free facility," he wrote.

The CBC proposals said the foreign investors are always encouraged to invest in Bangladesh. However, bonded warehouse facility is a special benefit for allowing duty-free import of raw materials.

The commissionerate proposed the measures considering the risk of revenue loss.

In the proposal, he said in many cases the customs authority has to consider the applications for bond licence despite suspecting the possibility of abuse of the duty-free facility.

"Some of the foreign investors, who do not have work permit, obtain registration from the Bangladesh Investment Development Authority (BIDA) as investors. They stay in Bangladesh for a short time," it said.

However, the CBC has to consider their applications as per the Bonded Warehouse Licensing Rules 2008, despite suspecting revenue loss risk.

"Local representatives of those companies are mostly employees. The customs authority will not be able to hold them responsible for payment of taxes and duties in case of abuse of the duty-free facility."

Some local industries may also take the advantage of availing bonded warehouse facility in the guise of foreign investors, he wrote in the proposal.

Relevant consulates or embassies do not give any certification or guarantee regarding the foreign investors of the respective companies, he added.

Talking to the FE, Alamin Pramanik said the proposals have been submitted to plug holes in the existing laws.

"We always encourage foreign investment. But, there should not be any scope for abuse of the bonded warehouse facility or revenue loss through availing the benefit."

The CBC suggestions have been made on the basis of the customs officials' on-the-job experience in this field, he added.

The CBC issues bonded warehouse licence, commonly known as bond licence, mainly to the cent per cent export-oriented industries, offering duty-free benefit for import of their raw materials under certain conditions.

The conditions include the manufacturers must export the finished goods produced using the raw materials, and they would not sell the raw materials in the local market.

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