Factories disappear into thin air after taking duty benefits

Some 476 factories have vanished after taking tax and duty-free benefits under the bonded warehouse facility, costing the country hundreds of crores in lost revenues, a recent survey found.

The Customs Bond Commissi-onerate or CBC, which conducted the survey, has now suspended licences of the firms and informed the banks about the move.

It has also issued a notice to all customs houses and VAT commissionerates to stop the companies' import and export activities.

Some 314 companies out of the 476 firms owe Tk 726 crore in revenues to the government for non-compliance with the rules of the bonded warehouse facilities, according to the government agency.

The CBC carried out the survey through physical inspection of the firms that earlier got bond licenses for duty-free imports of raw materials for making finished products for exports, said a senior official of the CBC.

This was the first time the CBC in Dhaka has inspected all of the 6,000-plus bonded licensees it regulates. It checked whether the licensees have factories and required machineries, are operational and their volume of production.  

Bonded warehouses allow exporters to store taxable imports, mainly raw materials, in secured areas without payment of duties and taxes, and use them in manufacturing for export.

The authorities issue bond licences to export-oriented firms, allowing them to import raw materials at zero duty on condition that they will make finished products with the same imported raw materials and export them.

“Bond licence holding companies need to have a physical presence. But we have not found their existence,” said the official.

Most of these non-existent companies are from the apparel industry. There are also firms from plastic, packaging, accessories and electronics industries, according to the survey findings.

The commissionerate has started issuing notices to the management of the firms for their non-compliance. It has already taken actions such as freezing of banks accounts and filing cases against 86 firms.

The official also said bond licensees require submitting reports of their exports annually against the raw materials they import under the duty-free privilege. But many of these companies have not done so every year.  “It appears that these companies have misused the zero-duty import benefit and sold the imported raw materials in the local market,” he said, asking not to be named.

The CBC began inspections amid allegations that a section of the firms misuse the bonded warehouse facilities and deprive the country of revenues.

The malpractice also hurts businesses that import the same raw materials by paying duty and taxes for marketing in the domestic market.

The revenue administration provides bond licenses to export-oriented firms in sectors such as apparel, leather and shipbuilding.