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Upsetting the apple cart of the corrupt in P/ling

Corruption: For the past four days, Phuentsholing, the country’s biggest commercial hub, has been under continued Anti Corruption Commission (ACC) scanner.

ACC is investigating for corrupt practices that have evolved over the years to become a part of the regulating and enforcing agencies’ systems.

As of yesterday, the commission sealed eight shops and 10 stores in Phuentsholing.

Sources said the commission had also reportedly detained four customs officials, and about seven non-Bhutanese, who were suspected to have helped clearing agents in the town. However, two customs officials were released last evening, and a non-Bhutanese on April 23.

With increased trade volume, transaction procedures deviated leading to a formation of an integrated network of corrupt practices that manifested into tax evasion, fronting, fraudulent declaration, repatriation of INR, and customs mal-administration.

ACC officials, along with customs inspectors, are currently monitoring and verifying commodities imported from third countries at the regional revenue and  customs office (RRCO) complex.  Goods are unloaded and verified physically to ascertain whether the invoice tallies with the taxation.

“Such physical verification has been going on since the ACC started investigation into the customs administration four days ago,” a customs officer, who is working closely with the ACC team, said.

Commission officials at the assessment site said they verified the commodities physically to minimise tax evasion, and ensure that there was no malpractice at the clearing section. “We’re just verifying to get certain facts, although it’s not possible to verify every truckload of consignment physically,” an ACC official at the site said.

The shops were sealed to verify and assess the value of declaration.  A majority of shops, despite bearing Bhutanese names on signboards and licenses, were run by non-Bhutanese.

Kuensel learnt that the commission had detained four customs officials in connection with collusion and bribery in imports, which resulted in under-valuation of tax, and for not assessing and verifying the consignments properly.

However, ACC officials refused to provide details, saying the cases were still under investigation.

A Phuentsholing resident said that many established shops declare less than what they import.  Some entrepreneurs also declared invoices higher than what they imported, while others declared less than what they import, which leads to over- and under-pricing.

Kuensel learnt that importers evade tax through non-declaration of imported goods, under-declaration or under-invoicing, by reflecting the value of imported goods far below the actual cost.

“It’s not possible for established enterprises to pay taxes not more than Nu 0.1 million or Nu 0.2 million,” another Phuentsholing resident said. “Even a civil servant, who earns a monthly salary of Nu 50,000, pays more than Nu 100,000 as personal income tax; how come business people dealing in millions pay just a meagre amount of tax?” he said.

Sources also say that Bhutanese overprice goods they import from India to claim INR from banks.  For instance, an importer will import non-taxable items, like rice, sugar and oil, worth Nu 20 and declare an import of Nu 200, on which they claim INR.

Sources said ACC officials were also looking into the tax administration system, which was reportedly weak, and how the enforcement agencies were failing their duties as the country was losing millions in tax collection.

Kuensel has learnt that ACC had intercepted and seized two truckloads of consignments in Gedu, November last year.  The consignments, which are still under the commission’s custody, had different items from what they declared in the invoice.

Regional customs officials in Phuentsholing said they are not sure on what grounds ACC officials detained their colleagues.

The customs office usually deals with issuing clearances for imports from India and third countries.  Goods imported from India have to pay sales tax, while third country goods are levied both sales tax and customs duty.

Regional customs director, Sonam Dorji, said they cleared between 200 to 300 truckloads of consignments everyday, excluding countless minivan loads.  If customs inspectors and officials physically examined each and every commodity in a truck, he said that it would take more time and importers would have to pay more for the container.

“A 100 percent physical examination of consignment isn’t possible unless you have information on contraband goods,” he said.

Another customs official said that 80 percent of the country’s trade takes place in Phuentsholing, which was managed by just 69 customs officials.

“We face challenges of limited space,” the customs officer said. “We also requested the ministry to increase manpower and space.”

The ACC chairperson, Dasho Neten Zangmo, refused to comment on the investigation, but said, “What happens in Phuentsholing is known to the public. But nobody does anything about it,” she said. “Who benefits? What cost will our children bear in the future? If Bhutanese don’t care for the nation and its collective wellbeing, we can’t expect others do so.”

By Rinzin Wangchuk, P/ling

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One comment

  1. Development practitioner

    The solution to under-/over-invoicing is fairly simple. The system exists. It is only about the intent to implement it.

    All major imports from India must be on proper invoices of the suppliers where Indian Tax Identification Numbers (TINs) MUST be indicated. The suppliers must quote rates exclusive of Indian taxes (for this they need export permit which I understand is not difficult to obtain). The real time gross settlement (RTGS) releases from Bhutanese banks should go to ONLY those accounts of suppliers with TINs. For every invoice the Department of Revenue & Customs need to issue Indian Tax Exemption Certificate (TEC). The TECs are given to suppliers and submitted to Indian tax authorities in lieu of tax deposits. Many suppliers, except the dubious ones, follow the procedure and there is no problem whatsoever.

    Also, there should be a system to report to appropriate Indian authority regularly the names of suppliers not accepting TECs. This system along with future implementation of GOI’s GST will not only fix the problem but also protect Bhutanese consumers from double taxation. I just cannot understand why it is so tough to implement!

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