Bangladesh losing earnings from foreign nationals

Close to a dozen eye-catching mega projects across the country are underway. A good number of under-construction projects are funded by some friendly nations. Along with financial support, the countries also supplied high-profile technicians and executive-level people. Besides, the workers belonging to loan providing countries, that have related expertise, are involved with projects to a great extent. It is important to note that apparel sector in Bangladesh is managed by hiring foreign people on condition of paying fat wages and salary.

The media outlet suggests that more or less 1.0 million foreign nationals are working here in various sectors since long. But, in recent years, their number is significantly growing following inception of new projects that are large in terms of size and financing. There is no chance to deny their role in Bangladesh economy. There should not be much criticism about financial and residential facilities given to foreign nationals who are currently discharging their duties here in Bangladesh. Actually, in view of political stability, foreign nationals look forward to joining the works abroad. To them, the country- Bangladesh is ranked better in respect of political situation.

For greater interest of Bangladesh economy, the state has to play an instrumental role in expanding their facilities. Any dilemma for fulfilling their timely-demand might bring huge loss to economy. It is alleged that the country’s tax collector is being deprived of earnings from foreign nationals. Most workers prefer to send their hard-earned money to home country without paying income tax. What is worrying that some 10,000 foreign workers submit their tax return- the newspaper report said. Bangladesh chapter of Berlin-based global graft watchdog, Transparency International in its study revealed that around 250,000 foreign people are working in Bangladesh. Of the total foreign workers only 90,000 are documented- TIB report said. Annually, they earn US$ 4.5 billion and most part of their earnings is sent to their home country through illegal ways. TIB study titled “Employment of Expatriates in Bangladesh: Governance, Challenges and Way-out” showed that foreign people working in Bangladesh remit around $ 3.1 billion through illegal means, evading government tax worth about $ 1.35 billion every year. In fiscal year 2018-2019, a total of Tk 181 crore came as income tax from 9,500 foreign nationals. But there is a provision of paying 30 per cent income tax on their earnings.

Among documented foreign nationals, about 41.0 per cent come from India. Besides, the people from China, Japan, South Korea and Malaysia come to Bangladesh for seeking high and low-paid jobs. The employers of foreign nationals are apparel sector, buying house, power plants, telecom companies, information technology, rawhide industry, healthcare, hotels and restaurants, cargo and freight forwards and multinational companies. The employment of expatriates without legal documents is grossly illegal and punishable. No undocumented foreign workers working in Bangladesh have so far been brought under interrogation despite moving before eyes. US-based Pew Research Center in a study last year said that annual outward remittance flow from Bangladesh amount to $2 billion.

The Guidelines for Foreign Exchange Transactions (GFET), Volume-1, drafted by Bangladesh Bank set rules and regulations on outward remittance sent by foreign nationals working in Bangladesh. GFET, according to Chapter -11 (section 8), said that foreign nationals who are resident in Bangladesh and who have an income in Bangladesh are permitted to make monthly remittances to the country of their domicile out of their current savings up to 75 per cent of their net income ( after deduct source tax). This remittance facility is not available to foreign-born wives of Bangladesh nationals. After expiry employment contract, foreign nationals go back to their home country with service benefits following terms and conditions set in GFET. Chapter -11 of GFET Volume-1 said a certificate from the employer, statements of net salary and allowances for each year, provident fund and allowances paid on retirement, bonus and other gratuitous payments for each year, whether the cost of passage for self and family is being paid by the employer approved by competent authority of Bangladesh government. In case where the period of stay exceeds 10 (ten) years, the bank’s certificate should cover the period of last 10 (ten) years- GFET also outlined.

According to GFET provision, the foreign nationals are told to place clearance certificates in respect of income tax and other taxes payable in order to receive service benefits before moving to their motherland for good. According to an English language business daily, the expatriates working in mega projects in Bangladesh set to avail tax exemption facility at the time of remitting their earnings to home country. For greater interest of economy, Bangladesh Investment Development Authority ( BIDA) took the decision recently. BIDA’s activities regarding outward remittance relaxation goes on in view of their demand who are linked with mega projects. If the BIDA’s proposal is approved unanimously, foreign nationals can remit 75 per cent of their income ( not on net income).

As the government is currently losing tax worth Tk 12,000 ( twelve thousand) crore every year from expatriates working in Bangladesh, BIDA’s recent decision is not timely at all if we look at tax to GDP ratio. The relaxation plan came in the light of neighboring countries’ practice. What should be noted that among south Asian economies’, Bangladesh lags far behind in terms of tax to GDP ratio. The neighboring countries’ tax to GDP ratio is much better than Bangladesh. With present 8.0 per cent Tax-GDP ratio, Bangladesh hardly achieves growth target set in 8th FYP program and in fiscal year budget. Instead of tax exemption on foreign people connected to mega projects, existing tax rate might have been relaxed in the wake of their demand. After viewing relaxation on outward remittance issue enjoyed by mega projects foreign people, the foreign nationals employed in other sector might raise voice soon. Ultimately, its impact is set to fall on country’s revenue to a great extent. What is worrying that most foreign nationals working in Bangladesh remains out of databank and tax net.

Considering current economic situation, foreign workers will have to be brought under umbrella of tax net. If seen any wrongdoings done by expatriates working in Bangladesh, related existing law must be applied. Bangladesh till now issues work permits based on soft rules. There needs to be applied hard terms and conditions concerning on sending of outward remittance and issuing work permits to foreign nations. Bangladesh should follow its peer economies like Vietnam regarding nursing foreign nations. A comprehensive databank along with globally standard and a policy framework for foreign nationals are needed to be prepared right now because around 100 economic zones are going to hire millions of foreign nationals in the days to come.

The writer is an economic affairs analyst