Tax evasion by foreign nationals working legally or illegally in Bangladesh has been an issue of concern for quite some time. Although lack of proper documentation, monitoring and legal enforcement by relevant agencies is often blamed for not taking effective measures to set things right, there is clearly a sense of disorderliness, if not outright indifference, in going about the task.
There were a few moves by the National Board of Revenue (NBR) and the Bangladesh Investment Development Authority (BIDA) to put in place mechanisms to identify employees legally working in the country and bring them under documentation while making sure that no undocumented workers are employed by any business or industrial enterprise. But the moves did not materialise. It has been found that bulk of these foreign employees -- some quite highly paid -- are not enrolled with the BIDA, a mandatory requirement prior to their employment. Some of them who are registered with BIDA do not disclose actual salary, and if at all, not in the foreign currency they are paid but in local currency-- as a ploy to evade higher taxes. The magnitude of the situation can be understood from a study by the Transparency International Bangladesh in February 2020 which said workers legally or illegally employed in the country were draining out approximately $3.15 billion each year.
The influx of undocumented migrant workers into Bangladesh is largely demand-driven, particularly in the export-oriented garment factories. There is nothing wrong in legal employment of foreign workers, and in certain sectors including garment and high-tech manufacturing, Bangladesh does need skilled workers. But a majority of these workers including mid-level supervisors and managers get employed without legal documents. Reports have it that most of them from neighbouring countries enter Bangladesh on multiple entry visa with prior arrangement for employment in local business enterprises dodging the law of the land. It is also often alleged that taking advantage of the lax or no vigilance, a large number of unauthorised foreigners are currently engaged in private hospitals, even elementary schools. Not all of them overstay, they go back and enter with fresh visas to continue with what they were doing. Their employers, for the most part, are the main facilitators in their illegal activities. According to the income tax law, an employer will face penalty amounting to as much as 50 per cent of his or her total payable tax or taka half a million for employing even a single foreign national without work permit from the competent authorities. The NBR is also competent to scrap tax benefits including tax holiday facility for the export-oriented companies, if found guilty of conniving with foreign workers in tax evasion.
There should have been a database of foreigners legally working in the country. This, on the one hand, would have facilitated the NBR to remain apprised of their tax payment status, and on the other, ensure that no undocumented foreigner is employed in the country. Under the circumstances, it is absolutely uncertain whether the authorities are earnest in bringing large number of foreign workers -- documented or undocumented -- under the tax net.