Govt to tighten baggage rules for gold bar to boost remittance inflow

The government plans to tighten regulations on inbound travellers bringing gold bars to prevent misuse and promote remittance inflow through banking channels, according to officials of the finance ministry.

The national budget for the upcoming fiscal 2023-24 will introduce a provision to confiscate any gold bar weighing more than 150 grams from passengers.

Additionally, filing tax returns for trust firms will be made mandatory to curb income tax evasion as many individuals evade taxes by forming trusts and diverting their money.

These proposals made in the draft FY24 budget were discussed in a recent meeting chaired by Finance Minister AHM Mustafa Kamal and presented at a meeting with Prime Minister Sheikh Hasina for approval on Sunday. The proposals will now be sent to the law ministry for legal review before being included in the budget before it is presented in the parliament on 1 June.

Currently, under customs' Baggage Rules, international passengers can bring up to 234 grams (equivalent to 20 bhoris) of solid gold up to two bars by paying Tk2,000 in taxes for each bhori (11.66 grams) of imported gold. Passengers can also bring up to 100 grams of gold ornaments duty-free, provided they contain no more than 12 pieces of a single type of ornament.

The proposed amendment to the baggage rules aims to encourage legal gold imports and prevent gold smuggling, said the finance ministry officials. 

NBR officials revealed that in 2022, Bangladeshi inbound air passengers brought in 54 tonnes of gold worth approximately Tk45,000 crore, with gold bars accounting for approximately Tk35,000 crore and the rest in ornaments.

According to the Gold Policy (2018), Bangladesh has an annual demand of about 18-36 tonnes of new gold. However, the Bangladesh Jewelers Association (Bajus) says this demand would be a maximum of 18-20 tonnes.

According to sources, due to the current baggage rules, expatriates are bringing gold bars to the country instead of sending remittances, and in many cases, these bars are being used to smuggle gold to neighbouring countries, depriving the country of foreign currency. 

However, there is no accurate data on the annual demand for gold in the country.

Dr Mohammad Abdur Razzaque, research director of the Policy Research Institute (PRI), believes that a national survey is needed to identify this demand.

Razzaque also stated that amending the baggage rules would not be the solution to encourage remittance inflow through banking channels, and instead, correcting the currency exchange rate and interest would be a more effective solution.

Gold import insignificant

In 2019, the Bangladesh Bank gave dealer licences to 18 institutions including a bank to legally import gold. Currently, 19 institutions have dealer licence to import gold, but their import volume is very negligible.

According to NBR data, only seven dealers have imported gold bars weighing 139 kg 640 grams since 2020, spending about $8.2 million.

In 2022, some 24 kilograms of gold were imported, down from 93kg a year ago. However, 12 dealers despite having the licence did not import any gold.

Sources mentioned that dealers have to pay Tk5,000 as a duty against one bhori of gold, while passengers can bring gold by paying a duty of Tk2,000 against a bhori of gold bar.

Trust fund return submission to be mandatory

Besides, filing of return of trust firm is being made mandatory in the upcoming budget.

Currently, trusts are being exempted despite taxable entities, many firms are not complying with the provisions of regular filing of income tax returns and payment of taxes, according to the ministry sources.

According to sources, various companies formed trusts under different names for the purpose of tax evasion and completed transactions through bank accounts to hide their own income. As a result, trusts and trust institutions are evading tax by not filing trust returns.

As there is no specific agency for regular monitoring of the financial transactions of such institutions, trust funds can be used for financing terrorism and money laundering.

Therefore, submission of returns against the income of the trust is being made mandatory in the next budget. It will increase the revenue of the government and prevent tax evasion.