Customs valuation rules yet to take effect twenty years on
The National Board of Revenue is yet to implement customs valuation (determination of the value of imported goods) rules although those were formulated twenty years ago in a bid to greatly help the country conform to international practices and curb illicit transactions in export and import.
Experts familiar with the problem said Bangladesh is yet to lay the groundwork for the guidelines and lacks satisfactory infrastructure and manpower to find misdeclaration or other malpractices, that the guidelines have not taken effect despite several attempts.
As per the overall Agreement on Tariffs and Trade (GATT) of the World Trade Organisation and the Customs Act-1969, the income authority of Bangladesh issued the guidelines in 2000 to look for the arm's length pricing of any transactions rather than using discretionary practices of identifying prices.
Bangladesh being a person in the World Customs Organisation (WCO) also faces increasing international pressure to implement the rules.
All customs stations of Bangladesh follow transaction value, tariff value and minimum value options for customs valuation but specialists say the latter two methods contradict the guidelines.
According to the transaction value method, the customs authority will accumulate revenue as per the products' prices mentioned in import documents.
The other two methods determine the minimum value greater than 700 imported goods, including cars, cosmetics, body spray, chocolate, lotion, coffee, foods and vehicle parts, by several special orders from NBR.
This means there is absolutely no scope for collecting duty significantly less than the prices fixed by the NBR. Customs officials and importers said if prices of these goods drop in the international market, importers have to pay duty at the fixed price.
In many cases, if the costs of the products increase in the international market, some unscrupulous importers usually do not mention it in the import documents to evade tax.
"We've instructed all customs houses on several occasions to implement the rules," said Golam Kibria, member (tariff policy and ICT) of NBR.
When there is any doubt about the transaction value, then there are five more alternative options for taxation.
"I really do not know why regulations isn't yet fully implemented," he added.
Customs officials feel that if the guidelines are implemented without eliminating the limitations, imported goods would take more time to be released, resulting in congestion at all customs stations and price spiral of the merchandise.
Going back time on 30 July 2018, NBR asked all of the customs stations to implement the guidelines simultaneously from 1 September through a "permanent order" but to no avail.
According to the Customs Valuation Rules-2000, the valuation needs to be done considering using the cost (invoice value) of products, which is called the transaction value method.
If the price is not determined in this technique or if the declaration of the importer isn't credible, it had been suggested to consider five other methods.
These methods are: the worthiness of identical goods (same importer, exporter and goods); the worthiness of similar goods (similar goods by different companies); deductive value (analyses of the neighborhood selling price); computed values (physical analysis of the business of the exporting country), and fall back method (valuation of the database of a recognised website).
This correspondent spoke to the heads of the country's three customs houses to find out why the guidelines have not been implemented yet.
On condition of anonymity, they said because the rules were not implemented for some time, a negative perception persists among all stakeholders.
The customs houses do not have sufficient manpower or infrastructure to verify the authenticity of most import and export documents, they said.
Some dishonest importers show lower prices of goods in invoices for evading tax, and if the rules are implemented, the importers will never be in a position to dodge taxes, which is why the traders are against these regulations, they added.
"The guidelines will be highly relevant to our country only once we can stop against the law transaction or misdeclaration," said an official of Custom House, Chattogram, asking never to be named.
Bangladesh should take some initiatives to verify the authenticity of the invoices of the exporters with the aid of its missions abroad, he added.
Tariff value and minimum value methods contradict the Customs Valuation Rules-2000, Customs Act-1969 and WCO rules, said Mahbubul Alam, president of Chittagong Chamber of Commerce and Industry.
"NBR is not considering scrapping these two options for its limitations."
The goods ought to be taxed at the purchase price at which the traders buy those, he said.
"It is not difficult to verify if a trader gives wrong information in the import documents."
