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Bangladesh has achieved a remarkable success in readymade garment export. Shelves of leading global brands cannot be imagined without made-in-Bangladesh garments. Still Indian and Pakistani dresses seem to have remained an integral part of Eid celebrations of Bangladeshi people, particularly those belonging to the middle class to affluent section. Their Eid joy perhaps remains incomplete without Indian lehengas and Pakistani three-pieces and punjabis no matter how expensive they are. A modest Pakistani three-piece or punjabi costs more than Tk 5,000 on an average while a gorgeous lehenga is priced at as high as a six-digit figure.
Consignments of garments from India and Pakistan as well as from China keep reaching Bangladesh round the year, but their number skyrockets before every Eid to cater to rising Eid demand. Shipments of fashion products also come from a few other Asian and European countries.
As a RMG export country, Bangladesh has high import duties imposed on the import of the same products and is supposed to earn huge revenues from their imports. But that is not the case just because of widespread tax evasion through under-invoicing. A vernacular contemporary has recently run a report on the extent of tax evasion by importers of Indian and Pakistani dresses. According to the report, businessmen declared the import price of each modest Indian three-piece as low as Tk 40, salwar-kameez Tk 18, girls' tops Tk 11 and gorgeous lehenga Tk 105. The declared price of a piece of Pakistani punjabi for adults is Tk 65. Customs authorities, however, did not release the goods in many cases just taxing them based on the declared prices, they themselves appraised the value of the products and levied taxes accordingly. According to people who observe duty issues, the appraised value is still far below the actual import prices of the dresses.
Data from the revenue authorities and trade bodies corroborate the suspicion that a significant portion of garment imports from India and Pakistan is undervalued. According to industry estimates, the actual value of imports from these two neighbouring countries could be several times higher than the declared values.
Under-invoicing in imports is persistent for long, but its extent in the import of garments has reached an alarming level in recent years. This illegal trade manoeuvre is causing substantial revenue losses to the government, and promoting hundi. Importers collude with suppliers to create fake invoices, often using hundi or offshore accounts to settle the remaining balance, thus keeping the undeclared portion of the transaction hidden from the authorities.
The Bangladesh revenue authorities have implemented various measures to curb under-invoicing, but enforcement still remains a challenge. Customs officials rely heavily on invoice declarations and are often unable to verify the authenticity of transaction values. The absence of a proper valuation database or reference pricing mechanism makes it difficult to cross-check the declared values. Corruption among the revenue authorities is also considered a big barrier to checking under-invoicing. Media reports suggest that a section of customs officials ignore under-invoicing in exchange for bribes, allowing fraudulent transactions to continue. Unless stricter oversight and transparency measures are introduced, this problem will not go away.
Checking under-invoicing is not an easy task and it requires stronger regulatory frameworks, technological interventions, and international cooperation. The revenue authorities should establish a minimum reference price for imported garments based on international market prices, leverage technology to cross-check invoices with export data from the source countries, enhance post-import audits to detect under-invoicing cases and introduce mechanism to impose heavier penalties, including revoking licences of fraudulent importers to deal with the issue. Enhanced digital documentation and real-time data sharing with the countries of origin could help reduce the malpractice.