Usher in international forex, name it remittance, and skip taxes. Easy? Not fairly. However one Bangladeshi businessman managed to tug it off – evading Tk180 crore in taxes within the course of.
The quantity is staggering. That sum alone may fund the federal government’s old-age allowances for 30 lakh aged residents for a whole month.
This revelation didn’t come from a leaked investigation however straight from the Nationwide Board of Income (NBR) chairman. At a programme on Monday, he disclosed how a businessman channelled Tk730 crore (really Tk721 crore) into the nation, passing it off as private remittances from China.
The trick? Positioning it as international earnings to say tax exemptions.
However there is a catch. Whereas remittances are tax-free, they solely qualify if the sender earns the cash overseas.
The businessman in query was residing in Bangladesh however claimed he earned the funds as consultancy charges from overseas. NBR’s tax intelligence division discovered he was working a enterprise regionally whereas thousands and thousands had been transferred underneath his title.
“This wasn’t doable with out inside assist,” an NBR official accustomed to the probe advised The Enterprise Commonplace, hinting at collusion inside tax workplaces. “It is a traditional case of coverage abuse.”
Who is that this businessman?
On the centre of the storm is SM Faruqi Hasan, chairman of Protik Group, a conglomerate with pursuits in ceramics, actual property, meals, and power.
Effectively-connected and politically lively, Faruqi was as soon as vp of the Awami League’s Dhanmondi Thana unit. The social gathering dominated Bangladesh for over a decade and a half earlier than being ousted on 5 August final 12 months following a student-led rebellion.
Faruqi has reportedly fled the nation because the fall of Sheikh Hasina, and his cellphone stays switched off.
Based on NBR intelligence officers, the 67-year-old obtained funds from firms like Norinco Worldwide Company and China Shipbuilding and Offshore Worldwide Firm.
Officers mentioned they’d by no means encountered such a tax evasion methodology earlier than.
Faruqi failed to offer proof of international earnings, violating tax exemption situations – making him chargeable for taxes.
Tax specialists clarified that consultancy charges will not be tax-exempt if introduced into the nation. Banks sometimes deduct an preliminary 10% tax, with further taxes of as much as 25% relevant.
An NBR tax intelligence official, requesting anonymity, advised TBS, “We have already instructed him to pay 25% tax and his accounts at Southeast Financial institution, Jap Financial institution, and a number of other different banks have been frozen.”
He added, “These frozen accounts maintain over Tk100 crore.”
He suspects the cash may both be embezzled funds throughout the earlier authorities’s tenure or proceeds from unlawful transactions linked to offers with China.
“There are additionally suspicions that high-ranking figures from the previous authorities benefited from these funds, with the title of a former prime minister’s adviser surfacing,” he added.
How did officers let this occur?
Over 9 years, Faruqi introduced Tk721 crore into the nation – cash that ought to have attracted Tk180 crore in taxes, none of which was paid.
Based on NBR knowledge, in FY22 alone, he introduced in Tk269 crore. Within the following two years, he transferred Tk77 crore and Tk81 crore, benefiting from remittance exemptions. Over the earlier 4 years, almost Tk300 crore was transferred.
NBR data present that suspicions arose over his tax filings for FY22 and the earlier 4 years, prompting a assessment. Nevertheless, three officers in cost on the time dominated no taxes had been relevant.
Faruqi was registered underneath Dhaka’s Tax Zone-5, the place the commissioner on the time was Abu Sayeed Md Mustaque, now an NBR member.
Regardless of a number of calls and messages, he didn’t reply.
A former deputy tax commissioner admitted to TBS that almost Tk300 crore in remittances over 4 years was granted tax-free standing.
“Because the financial institution did not cost tax on international remittances, we did not both,” he mentioned. “Based on the legislation, if earnings is earned overseas, it’s thought-about remittance and tax-free—even when the person resides in Bangladesh.”
He added, “This wasn’t my resolution alone; senior officers permitted it.”
Former NBR tax coverage member Syed Md Aminul Karim advised TBS, “This cash ought to have been taxed. Why it wasn’t is unclear.”
A tax official, requesting anonymity, advised TBS, “Officers had been seemingly pressured by influential political figures. These accountable might now face penalties.”
Tax professional Snehasish Barua famous, “Consultancy charges earned overseas whereas residing in Bangladesh are taxable, aside from IT sector earnings.”
What in regards to the banks?
Syed Mahbubur Rahman, managing director of Mutual Belief Financial institution and former president of Affiliation of Bankers Bangladesh, emphasised the function of banks and officers in approving such transactions.
“Suspicious Transaction Experiences (STRs) ought to have been raised, and Bangladesh Financial institution ought to have been knowledgeable. How was this cash cleared in any other case?” he questioned.
He suspects it was not only a banking oversight however seemingly an intentional act.
Zahid Hussain, former lead economist on the World Financial institution’s Dhaka workplace, speculated that political affect from the ruling social gathering on the time may have performed a job.
“An intensive investigation may reveal far more. These accountable should face authorized motion,” he mentioned.
Are there extra such instances?
The federal government offers tax exemptions throughout a number of sectors, together with remittances, poultry, fisheries, IT, and exports.
In FY21 alone, over Tk11,000 crore was waived for remittances, whereas poultry and fisheries obtained almost Tk3,000 crore in exemptions.
Throughout a pre-budget dialogue in Agargaon on Tuesday, the NBR chairman mentioned, “The federal government provided diminished tax charges to help the fisheries and poultry sectors, however these advantages have been extensively misused.”
Media experiences have additionally surfaced about fraudulent claims the place companies collected export incentives with out really exporting.
Moreover, many political figures reportedly declared fisheries earnings to use tax breaks – funds suspected to be black cash.
On Wednesday, in response to media queries, the NBR chairman reiterated, “Tax advantages in poultry and fisheries have been closely misused,” hinting at a doable discount in exemptions.
Nevertheless, Zahid Hussain cautioned,”Contemplating the fact, withdrawing tax advantages from real remitters could be unfair.”
