BANGLADESH

CUSTOMS

Customs Administration Modernization Project (CAM-1)

Inception : 01 October 1999

Completion : CAM-1 30th September 2003 & Automated System for Customs Data
(ASYCUDA) 30 June 2004

Notable Achievements:

A. Policy and Procedural Reform

• Amendment of Customs Act. The Customs Act was amended in compliance with
the Kyoto Convention―the international convention to harmonize the Customs
rules and procedures.
• Simplification of Customs Procedures. The import and export customs clearance
procedures were simplified by bringing down the signature requirement. For
import consignments the signature requirement was brought down to 11-13 from
49-51 required previously and for export 5-7 from 38-42 signatures.
• Simplification of Customs Tariff. The 10 digit
harmonized system (HS) classification in the Customs Tariff was completely
revised and 8 digit HS classification was introduced. This has drastically reduced
the tariff lines and hence has established transparency.
• Compilation of Customs Statutory Regulatory Orders (SROs). All the Customs
SROs were compiled and a single book was published for ready reference.

B. Automation
1. Customs Information Management System. A number of computer software
modules were developed for better management of the Customs information system.
• valuation module for customs valuation of imported goods, intended to be
used in the Customs Valuation and Internal Audit Commissionerate and
Custom Houses;
• duty exemption and drawback module for the Duty Drawback Office;
• bond module for the Customs Bond Office. This module included
utilization declaration module to be used in the Bangladesh Garments
Manufacturers & Export Association office;
• selectivity and risk analysis module for Custom houses to select
consignments for examination on the basis of risk analysis;
• management information system module includes a number of modules
for customs information management.

2. ASYCUDA. Introduction of
• The latest version of the software, ASYCUDA++, at all the important
Customs stations, e.g. Chittagong Custom House, Dhaka Custom House,

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 Benapole Custom House, Inland Container Depot, Chittagong Export
Processing Zone;
• Post-entry data capture to capture data of all the manually operated Land
Customs Stations;
• Direct Traders Input;
• Customs Clearance under closed-loop;
• National import/export data archive and the channel for data distribution
to the stakeholders, i.e. Bureau of Statistics, Commerce Ministry, Export
Promotion Bureau, Foreign Trade Institute.

VALUE ADDED TAX (VAT)

A. Project Title: Excise, Taxes & Customs Data Computerization Project

Project Objectives :
• strengthen the Statistics and Research Wing of National Board of
Revenue (NBR);
• computerize the regular operations of income tax wing of NBR and field
offices of income tax;
• set up a fully equipped valuation cell at NBR;
• complete customs computerization and develop new systems for speedy
processing;
• computerize the operational aspects of the intelligence, inspection, and
training directorates of the NBR;
• train Income Tax/VAT/Customs and relevant NBR officials;
• set up e-mail and a local networking system both in Customs, VAT and
direct tax wing.

Implementation Period:
December 1989 - June 1997
June 1990 - June 1999.(Revised)

Project Financer:
Donor: International Developmetn Agency.
GOB : Loan from Donor TA-6 (Credit 2393-BD)

B. Project Title: Technical Assistance for Strengthening Value Added Tax

Administration

Project Objective :
• amend VAT registration,
• advise on the organizational structure of the VAT Wing,
• strengthen the management of VAT audit and investigation,
• develop VAT publicity campaign and training program,

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 • advise on user requirements for IT.

Implementation Period:
July 1999 – June 2002
23 Nov 1999 – 22 Nov 2002 (Revised)

Project Financer:
ƒ Department for International Development (DFID) Grant
ƒ British High Commission

C. Project Title: Reforms in Revenue Administration

Project Objectives:
• introduce a common tax identification number (TIN) for income tax and
VAT,
• prevent revenue leakage by consolidating internal audit and inspection,
• enforce more effective tax and customer compliance.

Implementation Period : June 2002 – February 2006.

Project Financer : DFID UK.

D. Project Title: Modernization and Automation Project (MAP).

Project Objectives :
• develop and reform the administrative structure of NBR,
• develop the human resources in NBR,
• strengthen the Large Taxpayer Unit (LTU).

Implementation Period : July 2005- June 2006

Project Financer: World Bank. GOB

INCOME TAX

The major reforms that have taken place in the income tax department of Bangladesh are
enumerated below:

1. Introduction of TIN. Formerly each taxpayer had a local registration number called
General Index Register number. Nationwide tax identification number was introduced in 1994.
Each taxpayer has a 10 digit TIN. This identification number is allocated and stored centrally
from NBR. NBR is now working to introduce a common identification number for income tax &
VAT to be called unique taxpayer number (UTI).

2. Widening of withholding tax. Initially withholding tax was levied on salary and
contractors. To increase the tax network and collection, it was gradually expanded over the
years. Now withholding tax is imposed on 31 items, including contractor, supplier, importer,
salary, interest on bank deposits.

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3. Simplification of self assessment. Self- assessment system has been widened over
the years. At present, all categories of assessees are entitled to submit self assessment return.
The declared income of the assessee is accepted unquestionably under the system.

4. Establishment of Large Taxpayers Unit. LTU was established in November, 2003 in

order to develop a modern, efficient tax system. NBR with the support from DFID has initiated
this reform program. The main objectives of establishing LTU are as follows:

• modernize tax practices through functional organizationm

• improve the management data and information systemm
• provide better services to taxpayers,
• secure and increase income tax revenue,
• increase professionalism in tax administration.

To date no official evaluation has been made regarding the success of LTU. But it can be said
broadly that this reform process has a positive impact on tax administration.

THE NATIONAL BOARD OF REVENUE’S STRATEGIC DEVELOPMENT PLAN

Sponsor: World Bank.

NBR has prepared this Strategic Development Plan to describe its vision, goals and strategies
to be implemented over the next few years in order to modernize and strengthen tax policy and
tax administration in Bangladesh. During the past few years there have been a number of
studies conducted to assess the strengths and weaknesses of the NBR, and several projects
have been initiated to address some of the identified problems. While progress has been made
in a number of areas, there has not been an overall strategic plan to map out a more
comprehensive and well-structured program for modernizing tax administration. This is the main
objective of the Strategic Development Plan.

A. NBR Core Goals

• increase revenue collection targets through modernization of tax administration

and procedures;
• develop a sound and transparent legal and regulatory system;
• identify areas where revenue is at risk and to deal firmly and fairly with non-
compliance;
• facilitate trade flows leading to speedy clearance of import/export cargo;
• develop and manage an effective revenue administration staffed with a well
trained and motivated workforce;
• design and deliver fair, responsible, and effective enforcement mechanisms in
ways that directly respond to changes in the economic environment and
technological opportunities;
• foster and develop a taxpayer service culture and improve participation from civil
society;
• ensure all businesses and individuals are treated in a uniform and consistent
manner;

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 • develop a modern IT-based tax administration that is at once efficient, effective,
and transparent.

3. NBR Modernization Strategies. The NBR has identified the following seven strategies
to achieve the above goals:

Strategy 1. Organizational Restructuring

A. Phased Introduction of a Functional Model. The NBR intends to improve

productivity, accountability, and compliance by moving towards a functional
organizational design in well planned stages. A modern organizational structure will
enable NBR management to allocate routing and standardize work to specialized units
supported by appropriate information technology, while assigning highly trained talent to
more complex tasks that require problem solving and evaluation skills, such as auditing
and collection enforcement. A functional approach will provide a cross-checking across
units reducing opportunities for revenue leakages. During the initial phase of this
transition and, for the near term, the NBR will operate with a hybrid structure that
organizes human resource management, auditing, collection enforcement and
specialized services such as legal and information technology along functional lines,
while maintaining the existing “ type of tax structure.”

B. Strengthening Core Management Functions. The NBR will strengthen its

core management functions so that it can successfully implement change and monitor
performance. This will require changing the composition of the Board and allowing
certain advisory support services to be made available to the Chairman and Board
Members. This will include the creation of specialized functional units such as audit,
collection enforcement, human resource management, legal services, and information
and communications technologies directly reporting to the Chairman.

Strategy 2. Improving Human Resource Management. The NBR will improve human
resource management by implementing a strategy that will redefine functions and job
responsibilities, establish new recruitment standards, delineate clear career development paths,
establish an effective training program, improve internal communications, and adopt other
modern practices including pay incentives to motivate staff. The NBR will advocate greater
flexibility in the management of its human resources in order to motivate staff, improve
productivity and strengthen professionalism and integrity.

Strategy 3. Strengthening the Legal and Regulatory Framework. The NBR plans to
undertake a review of the existing laws and regulations with a view to modernizing the legal and
regulatory framework. The approach will be to initially focus on priority amendments and
eventually to rewrite the laws to ensure clarity, transparency and predictability. The NBR plans
to phase-in legal reforms by identifying short-term, medium-term, and long-term improvements
to the taxation system.

Strategy 4. Strengthening the Effectiveness of the Large Taxpayer Units. Effective

administration of large taxpayers will be improved through the strengthening of the Large
Taxpayer Units for income tax and VAT.

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Strategy 5. National Implementation of Tax Administration–Functions/Procedures. The
NBR plans to extend the new tax administration functions and procedures introduced in the
LTUs to cover small and medium taxpayers throughout the country.

Strategy 6. Customs Modernization and Trade Facilitation. The NBR remains committed
to continuing modernization of customs operations and implementation of additional measures
for facilitating trade. This will speed up clearance of import/export cargo and stimulate industrial
development and economic growth.

Strategy 7. Strengthening Computerization of the NBR. The NBR intends to make more
productive use of information technology as a way to increase the efficiency, effectiveness and
transparency of revenue collections.