2009-18 Export-Import: Bangladesh lost $8.27b a year to misinvoicing

The country lost $8.27 billion every year on average between 2009 and 2018 resulting from misinvoicing of values of imported and exported goods by traders to evade taxes and illegally move money across international borders, the Global Financial Integrity (GFI) said on Thursday.

The average loss of customs and taxes was 17.3 percent of Bangladesh's trade with all its trading partners during those years, said the GFI in its latest report, "Trade-Related Illicit Financial Flows in 134 Developing Countries 2009-2018."

The Washington-based think tank did not provide data on trade misinvoicing on Bangladesh after 2015.

The report comes at a time when illegal money transfer through various channels, including under and over invoicing of internationally-traded goods, are believed to be rampant in the country due to alleged collusion between dishonest customs officials and traders.

The GFI report did not have year-wise data on Bangladesh for 2014, 2016, 2017 and 2018.

The Daily Star emailed GFI Communications Coordinator Lauren Anikis about the reason. No reply came until this report was filed last night.

Last year, in a reply to an email from The Daily Star, Maureen Heyd, communications coordinator of the GFI, said they did not know why reporting to the UN Comtrade for Bangladesh was dropped in recent years. "This is unfortunate, as it limits our ability to investigate illicit activity in Bangladeshi trade," said the reply.

During 2008-2017, the annual average loss of Bangladesh for trade misinvoicing was $7.53 billion, according to the previous GFI report, which also did not have data on Bangladesh for 2014, 2016 and 2017.

The GFI report estimated $1.6 trillion in potential trade misinvoicing among 134 developing countries. Of the amount, $835 billion worth potential trade misinvoicing occurred between developing countries and 36 advanced economies, in 2018.

Among South Asian countries, Bangladesh lost third highest amount to trade misinvoicing. India lost the highest amount, $67.49 billion, followed by Pakistan -- $8.5 billion -- annually during 2009-2018.

GFI report has data for India for all the years. In case of Pakistan, no data was available for the year 2018.

In percentage terms, the average loss for trade misinvoicing was 19.8 percent of India's total trade, 20.2 per cent of Nepal.

GFI President and Chief Executive Officer Tom Cardamone said during a time when developing countries are scrambling for every penny to fund vaccines and medicines to fight Covid-19, billions of dollars in duties and taxes are going uncollected.

"It is absolutely shocking ...," he said.

The report said trade misinvoicing is a persistent problem across developing nations, resulting in potentially massive revenue losses and facilitating illicit financial flows across international borders.

It said trade misinvoicing occurs when importers and exporters deliberately falsify the declared value of goods on invoices submitted to customs authorities.

This allows traders to illegally move money across international borders, evade tax and/or customs duties, launder the proceeds of criminal activity, circumvent currency controls, and hide profits in offshore bank accounts.

GFI said it examined official trade data reported to the United Nations to identify value gaps, or mismatches, in the data regarding what any two countries reported about their trade with one another.

Towfiqul Islam Khan, senior research fellow at Centre for Policy Dialogue (CPD), said the government authorities, particularly Bangladesh Financial Intelligence Unit (BFIU) and the National Board of Revenue (NBR), should implement the steps it wanted to take earlier in order to curb money laundering and trade misinvoicing.

He said BFIU earlier framed an anti-money laundering strategy and planned to take a number of steps.

"We have not seen implementation of the initiatives," he said adding that the NBR should make public the steps it decided to take earlier to prevent the illegal money transfer through overseas trade channel.