Freelancers stash chunks of earnings in foreign coffers

Bangladesh misses out on substantial sums of foreign currencies as most freelancers are not repatriating much of their cross-border incomes for multiple disincentives, including lower gains and higher promotional expenses, sources say.

Much lesser exchange-rate gains for the remitters and higher taxing of their outbound expenses on promotion purposes cardinal ones among the deterrents, according to insiders in the fledging gig-working sector.

To avert such financial burdens, active freelancers who normally earn more than $800 per month stash 50 to 70 per cent of their earnings in accounts outside the country. And the result is obvious--the forex-hungry nation is deprived of millions of American greenback per year.

The Financial Express correspondent finds these through an investigation into contributions of the country's global digital earners to the foreign-exchange reserves of the economy that passes through multipronged macroeconomic stresses in recent times.

In fact, the freelancers maintain two accounts, one at home and another abroad and the digital payments for their works are transferred into their overseas account. To meet their regular spending, majority of the freelancers on average bring 30 per cent to 50 per cent of their incomes back home. But they keep remaining parts in their international cards, according to them.

Minhazul Asif, the founder of a Chattogram-based freelancing group - CodemanBD-says freelancers used to get exchange rate at less than Tk 120 per dollar in the banking system here because of various charges by the commercial banks.

On the other hand, he says, Bangladeshi citizens working abroad are getting exchange rate of around Tk 125 a dollar and 2.50-percent state-sponsored incentives.

Apart from this disparity, the freelancer notes, they are often required to purchase services from outside on website promotion-purposes. But the country's revenue board slapped 15-percent VAT on such outbound foreign currencies. In addition, freelancers need to bear around 25 percent as source tax against such outward remittance if beneficiaries do not pay source tax in Bangladesh.

"By paying for such services from our international cards, the freelancers can avoid the tax-burden. These are the factors that discourage freelancers from bringing all the earnings back home," the insider says about the secrets surrounding a potential sector of knowledge economy.

Irfanur Rahman, the founder of BDtigers, feels the country needs to give enough facility to the digitally dollar-earning communities, allowing them to overcome the high-tax burden.

"Unfortunately, it is not happening here. We're also earning foreign currencies like our overseas workers. So, the government should treat us equally," he says.

Seeking anonymity, another freelancer has said a good number of them used to sell dollars in the open market to platforms like PayPal and Payoneer and gain exchange rate of over Tk 125 a dollar.

He says the country now earns $1.0 billion annually in accordance with the Payoneer reports. The government can take it to $3.0 billion in the quickest possible time through removing barriers they have been facing.

Chairman of Bangladesh Freelancing Development Society (BFDS) Dr Tanjiba Rahman sees huge prospect of freelancing but says the policymakers are probably not seeing this. The country has the capability to earn much more than what it earns now.

She suggests the country needs to create such a digital ecosystem where the forex earners do not need to face hassles, including too many questions from the banks.

"But, the positive part is that the banks start changing their dealing pattern to the freelancers by innovating products," she says, calling upon the government to provide 2.5-percent incentives and cut down the existing VAT below 10 per cent with source tax at zero rate.

According to the BFDS, there are some 1.05 million freelancers in the country. Of them, some 250,000 are active ones who earn through freelancing regularly.

Seeking anonymity, a BB official has said the freelancers have been bringing an insignificant volume of foreign currencies, which is a cause of concern.

"We keep requesting the ministry of finance to provide incentives to the freelancers like the traditional remitters. But we're yet to get any positive response," he said.

Contacted over the conundrum, Deputy Managing Director and Head of Retail of BRAC Bank PLC Mahiul Islam said the bank made significant strides in supporting freelancers by streamlining foreign-currency transactions and offering specialized banking solutions. They are being served under a special customer sub-segment called Matrix.

They offer a specialized account for freelancers called ERQ (Export Retention Quota) Account, which allows freelancers to hold and transact in USD without the need for dollar endorsement. A dedicated team is in place to handle freelance customers.

Citing the bank's data, the senior banker said there are around 2,300 freelancer customers currently active. In last twelve months, approximately $14 million in remittance has been credited through these accounts.

According to a report of Payoneer, a US-based financial services company that provides online money transfer globally, Bangladeshi freelancers earned approximately $1.0 billion in 2023.

This figure highlights the significant contribution of the country's freelancing sector to the global economy at large. The report also mentions that Bangladesh is among the top 10 freelancing countries worldwide, ranking eighth with a growth rate of 26 per cent.

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