Govt losing large amount in taxes as DPI providers not under tax net

The government is losing large amount of money in taxes as many of the foreign companies are supplying products to Bangladesh directly through their local agents without being registered locally, industry insiders said.
The Direct Proforma Invoice (DPI) providers running large-scale business here, but they are not under the existing income tax net.
Such discriminatory policy creates uneven competition in the indenting businesses too, sources said.
Registered indenters are complying with the existing tax rules and paying, both individual and corporate income tax, while DPI providers are not doing so.  
The number of registered members of indenting agents has sharply declined to 500 this year from some 5000 in fiscal year 2007-08, according to industry sources.
Industry insiders say once around 80 per cent of the country's trade was operated through the agents, but this practice has now declined drastically for which there is a rising trend of under-invoicing, resulting in loss of government revenues.
According to the import policy order, foreign companies are allowed to export products through local agents by providing DPI. There is no enlistment to have registration number or be enlisted in the tax net.
Import of goods through DPI, basically the invoice exchanged over the trade of physical goods, is out of the tax net for which the government is being deprived of huge revenue, while the DPI-issuing persons need not to be accountable to anyone.
Noticing the matter, Finance Minister AMA Muhith has sent three letters, in phases, to take steps to bring the business under tax net.
In a recent letter to the ministry of commerce and the National Board of Revenue (NBR), he said the indenting business has faced a blow due to the discriminatory policy.
The finance minister instructed the NBR not to allow any commercial privilege against the DPI unless the provider of the invoice gets registered locally.
Referring to his previous instructions last year, the FM said no effective measure has so far been taken on the basis of his letter.   
The finance minister suggested registration of exporters from abroad which will enable the NBR to know about the goods coming to Bangladesh with HS code which will ultimately help to have a database of importable commodities in Bangladesh.
Talking to FE, commerce secretary Mahbub Ahmed acknowledged the finance minister's letter on DPI registration.
"We are yet to decide on the issue. It is under scrutiny," he said.
Bangladesh Indenting Agents Association (BIAA) president KMH Shahidul Haque has called for streamlining the import trade and creating level playing field in the businesses by bringing DPI under tax net.
"The indenting business, one of the most potent sectors for boosting the country's foreign exchange reserves, faces extinction, due to lack of a level playing field for indenting agents working in Bangladesh and providers of DPI without tax net," he said.
Recently, 15 per cent VAT has been waived as per directive of Finance Minister.
The indenting agents have to pay corporate tax at a rate of 37.50 per cent on their annual net profit. They are also paying tax on individuals' income.
Sources said that doing business legally has become more difficult in the face of uneven competition in respect of importing through DPI.
Opening LC through DPI was first initiated in 1986-87.
On March 7 last, Chinese Ambassador LI Jun at a meeting announced that China-Bangladesh trade was worth US$ 10.0 billion last year while official figure of imports as per BB is $6.3 billion & export is USD 458 million.
Industry insiders have expressed their critical view over the differences in trade volume data about $4.3 billion and held the unregistered DPI system responsible for this.    
They said besides China, other exporting countries, India, Pakistan, Korea, Singapore, Hong Kong, Vietnam also have some gap.
They claimed that the government is losing over $2.5 billion in taxes annually with the process while the government could build its much-desired Padma Bridge with the amount.
Industry insiders also said if the exporters are registered by BB and the NBR the DPI providers will be accountable to the government and under-invoicing will come down.