Contraband, counterfeit cigarettes have surged in market

The government lost a substantial amount of revenue last year due to a surge in contraband cigarettes and local counterfeit production, said National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan today.

This came about in spite of the imposition of higher taxes, he said, adding, "Last year, we significantly increased the tobacco tax, which now stands as high as 83 percent, and we raised prices as well."

"But despite that, we're not seeing proportional growth in revenue. We expected an additional Tk 10,000 crore, but that didn't materialise," he added.

"There is a huge quantity of contraband cigarettes circulating. I've seen many smokers using foreign cigarettes, which come into Bangladesh without paying any tax," he told a seminar at the NBR.

The NBR organised the seminar to highlight the changes brought about in income tax, VAT, and customs rules in the current fiscal year's budget, as well as to inaugurate e-return submissions for the current tax year. Finance Adviser Salehuddin Ahmed attended the programme as the chief guest. Economic Reporters Forum President Doulot Akter Mala also spoke at the event, among others.

Khan said the customs offices in Chattogram and Dhaka often seize large quantities of these cigarettes. Even some counterfeit cigarette factories that pay no taxes have been raided and shut down, he said.

However, a lack of enforcement of the law at the field level is to be blamed for the revenue drop, he said.

"We must pay close attention to this. Again, this is an enforcement issue whether we are able to detect the counterfeit manufacturers and the untaxed imports entering the market," he said.

"Just making laws and assuming revenue will follow doesn't work," said Khan.

He said the amount of tax evasion was significant, and they needed to detect and recover that. "No new law is required for these, existing laws already cover it," he said.

However, there is a lack of proper law enforcement, he added.

"For instance, bonded warehouses have existed in Bangladesh since 2001, and we all know these are heavily misused. The more they are abused, the more revenue leakage we face," said Khan.

He also acknowledged that the revenue board reduced the penalty for customs misdeclaration to 200 percent in response to demands from the business community.

"The extent of evasion is very high, and taxpayers often perceive the entire system as a rent-seeking mechanism," he admitted.

"If I impose a penalty that's four times the due amount, all it takes is one negotiation with a customs checker to make it go away especially if there's a personal connection. This happens quite often," he said.

Even a 100 percent penalty—equal to the evaded amount—is no small matter. So, bringing it down to double the payable duty is still a significant deterrent, he added.

Responding to a journalist's question, the NBR chairman clarified, "The government has not provided any special privileges or benefits to Grameen Bank."