International trade is the biggest source of corruption in Bangladesh, says The Economist in an article published on September 3.
The London-based daily said the graft in this sector, if eliminated, “would leave the government [of Bangladesh] enough cash to double health spending and to pay for an infrastructure project as large as the Padma Bridge every two years.”
The article cited Forrest Cookson, described as an American economist and expert on Bangladesh's economy, as saying that stamping out “under-invoicing” problems from export-import might increase the country's tax-to-GDP ratio by 1.5%.
The report explained corruption in the form of “under-invoicing” with an example:
While importing sunglasses for $10 a pair, a Bangladeshi businessman asks the Chinese exporter to invoice for $1 for every item through the official channel; the letter of credit.
The government then acquires the tax for each pair of sunglasses on the $1 invoice.
The remaining $9 is transferred through an informal “hundi” system beyond the knowledge of the authorities concerned. This money is shifted to an offshore account of the Bangladeshi businessman.
The payment for the import is later made from the offshore account.
For the Chinese exporter, “under-invoicing” provides an opportunity to make his product more competitive in Bangladeshi market.
The article says fraud is more “appealing” in Bangladesh because of high tariffs and other barriers.