Import duty evasion drops as fine doubles

Import-related irregularities have gone down significantly after the National Board of Revenue (NBR) doubled the minimum penalty for evading duties, helping the government earn more in taxes.

Customs officials say the doubling of fines increased compliance among the traders to declare the names of the accurate products and prices.

The change helped the Chattogram Custom House (CHC) generate 23.23 per cent higher revenue at Tk 51,577 crore in fiscal 2020-21 versus Tk 41,854 crore a year earlier. In June 2020, the NBR fixed the minimum fine for a false declaration that is twice the amount of duty dodged. The penalty could be as high as four times the amount owed, depending on the extent of the irregularities.

Earlier, there was no minimum fine.

The Audit, Investigation and Research section of the CHC filed 2,707 cases and collected Tk 42.95 crore in penalties in 2019-20. The collection rose to Tk 81.83 crore in the last fiscal year, but the number of cases declined 31 per cent to 1,880.

Customs sources say since there was no minimum fine, unscrupulous importers had gotten away with what could be considered a slap on the wrist for their actions over the past 50 years.

Between July 2015 and December 2019, some 6,110 consignments were found to have been misquoted, and the importers were duly fined, showed data from the Custom House.

The authorities collected Tk 655 crore in evaded tax during the period. But the importers were slapped a fine of Tk 260 crore for resorting to irregularities, which was 36 per cent of the undeclared revenue.

CHC Commissioner M Fakhrul Alam said: "Irregularities have gone down because of the imposition of the minimum fine and strict implementation."

Before the minimum fine was introduced, the tendency to commit irregularities was moving upwards among dishonest traders due to nominal fines. Many customs officials were also misusing it, according to customs sources. 

The situation led the government to amend the Customs Act 1989 in 2020 to fix the minimum and maximum fines. As a result, irregularities have decreased in all customs stations and have had a positive impact on revenue collection.

Azizur Rahman, commissioner of the Custom House, Benapole, said there was a growing tendency among traders to make accurate disclosures thanks to the increased fine. Altaf Hossain, general secretary of the Clearing and Forwarding Agents Association, a platform of the agents that receive imported goods on behalf of importers, said: "The importers and we have no objection to the provision of the fines if anyone intentionally gives false information to evade taxes."

"However, we object if there is an unintentional mistake or no intention of revenue evasion. In many cases, it is resolved, but in some cases, the fine doubles. We have requested the customs authorities to consider it."

If an importer makes an inadvertent mistake, the consignment is released without penalty, said CHC Commissioner Alam.

Syed Golam Kibria, member for customs policy and ICT of the NBR, said unintentional mistakes could be understood by examining import documents.

"If the product description is the same as in the import general manifest and the bill of entry, but the HS (harmonised system) code is different because of an error, there is a chance to correct it without any penalty. The fine is only imposed when officials find different or extra goods without declaration."