Foreign liaison offices promote substandard RMG : NSI report
Published : Wednesday, 28 August 2013
Source: The financial Express
The National Security Intelligence (NSI) has found a major role of foreign liaison offices in Bangladesh in expansion of production of sub-standard readymade garments (RMG) by sub-contracting companies.
In an investigation report, the agency identified the intention of maximisation of profit by liaison offices as one of the major causes of collapse of the Rana Plaza and fire incident of the Tazreen Fashions.
Brigadier General TM Jubair, Director of the NSI Director General's (DG's) office, sent the report to the ministries of commerce, industry, home affairs, the National Board of Revenue (NBR) and the Board of Investment (BoI).
The agency recommended for legal actions by strengthening the BoI and forming a monitoring cell with the participation of intelligence agencies to stop such malpractices.
Following the recommendations of the investigation report, the BoI has formed a three-member probe body, comprising the officials of the BoI, the ministry of commerce (MoC) and the NBR.
The committee will investigate allegations raised against two BoI-registered liason offices -- Simple Approach Ltd and Norwest Industries -- for not abiding by the compliance requirements.
The agency report said investors can open a liaison office by keeping bank deposits worth US$ 50,000 but most of these investors remained out of supervision of the government entities after making investment.
However, the amount of investment that was fixed ten years back, remains still valid although that is inadequate in the present-day economic context.
The agency suggested the BoI and the NBR to strengthen monitoring of issuance of work permits and collection of taxes from such liaison offices.
Mainly the citizens of India and Sri Lanka are largely in control of the affairs of the liaison business, branch office, multinational companies or trading businesses as they can get B or T visa easily, the NSI report pointed out.
Such liaison businesses have caused a negative impact on growth of the local industries and promotion of the goals of sustained economic development, it said.
"Growth of the country's readymade garments industries is under a threat due to desperate activities of liaison offices," it added.
Liaison offices were associated with the Rana Plaza and the Tazreen Fashions.
Two RMG factories -- New Wave Style and New Wave Button -- out of five garments factories at the Rana Plaza were supplying orders to a liaison office named, M/s Simple Approach Ltd.
"New Wave was making garments for the UK-based Primark Stores Ltd. The order-supplying buying house of the company was the Norwest Industries Ltd," the report said. The owners of the Simple Approach and the Norwest are the Indian citizens.
Another company -- PPS group -- is operating two liaison offices in the style of Zamira Fashion Ltd and Anand Fashion Int. agency.
The companies are resorting to the same illegal practices, forcing local garment industries to cut cost by depriving workers and compromising on compliance requirements.
"These companies are taking a maximum amount of commissions from sub-standard factories and do repatriate money. Local factories receive less than half of the actual prices for their products that are paid by importers," the report said.
The agency also reported that there were hundreds of foreign citizens who obtained the so-called work permits from the BoI.
It has identified the Simple Approach that employs 26 officials and other members of its staff. Of them, 23 are Indians, two British and one American.
The company is showing a lower amount of salaries being paid to the members of its staff than the actual ones, the report noted while stating that the company has shown Tk 0.1 million as the amount of salary for its American official.
"There is a possibility to conceal salary income of foreign nationals to evade taxes," the report said.
With the recommendations, the income tax wing of the NBR recently sent letters to its concerned tax offices to strengthen monitoring of collection of taxes from foreign nationals and companies.
A senior tax official said foreign nationals are required to pay tax at 25 per cent of their incomes and there is no tax-exempted limit for them.
He, however, acknowledged that tax collection from foreign citizens is not satisfactory compared to that of the growth of foreign employees in the local and multinational companies, operating in the country.
Source: The financial Express
The National Security Intelligence (NSI) has found a major role of foreign liaison offices in Bangladesh in expansion of production of sub-standard readymade garments (RMG) by sub-contracting companies.
In an investigation report, the agency identified the intention of maximisation of profit by liaison offices as one of the major causes of collapse of the Rana Plaza and fire incident of the Tazreen Fashions.
Brigadier General TM Jubair, Director of the NSI Director General's (DG's) office, sent the report to the ministries of commerce, industry, home affairs, the National Board of Revenue (NBR) and the Board of Investment (BoI).
The agency recommended for legal actions by strengthening the BoI and forming a monitoring cell with the participation of intelligence agencies to stop such malpractices.
Following the recommendations of the investigation report, the BoI has formed a three-member probe body, comprising the officials of the BoI, the ministry of commerce (MoC) and the NBR.
The committee will investigate allegations raised against two BoI-registered liason offices -- Simple Approach Ltd and Norwest Industries -- for not abiding by the compliance requirements.
The agency report said investors can open a liaison office by keeping bank deposits worth US$ 50,000 but most of these investors remained out of supervision of the government entities after making investment.
However, the amount of investment that was fixed ten years back, remains still valid although that is inadequate in the present-day economic context.
The agency suggested the BoI and the NBR to strengthen monitoring of issuance of work permits and collection of taxes from such liaison offices.
Mainly the citizens of India and Sri Lanka are largely in control of the affairs of the liaison business, branch office, multinational companies or trading businesses as they can get B or T visa easily, the NSI report pointed out.
Such liaison businesses have caused a negative impact on growth of the local industries and promotion of the goals of sustained economic development, it said.
"Growth of the country's readymade garments industries is under a threat due to desperate activities of liaison offices," it added.
Liaison offices were associated with the Rana Plaza and the Tazreen Fashions.
Two RMG factories -- New Wave Style and New Wave Button -- out of five garments factories at the Rana Plaza were supplying orders to a liaison office named, M/s Simple Approach Ltd.
"New Wave was making garments for the UK-based Primark Stores Ltd. The order-supplying buying house of the company was the Norwest Industries Ltd," the report said. The owners of the Simple Approach and the Norwest are the Indian citizens.
Another company -- PPS group -- is operating two liaison offices in the style of Zamira Fashion Ltd and Anand Fashion Int. agency.
The companies are resorting to the same illegal practices, forcing local garment industries to cut cost by depriving workers and compromising on compliance requirements.
"These companies are taking a maximum amount of commissions from sub-standard factories and do repatriate money. Local factories receive less than half of the actual prices for their products that are paid by importers," the report said.
The agency also reported that there were hundreds of foreign citizens who obtained the so-called work permits from the BoI.
It has identified the Simple Approach that employs 26 officials and other members of its staff. Of them, 23 are Indians, two British and one American.
The company is showing a lower amount of salaries being paid to the members of its staff than the actual ones, the report noted while stating that the company has shown Tk 0.1 million as the amount of salary for its American official.
"There is a possibility to conceal salary income of foreign nationals to evade taxes," the report said.
With the recommendations, the income tax wing of the NBR recently sent letters to its concerned tax offices to strengthen monitoring of collection of taxes from foreign nationals and companies.
A senior tax official said foreign nationals are required to pay tax at 25 per cent of their incomes and there is no tax-exempted limit for them.
He, however, acknowledged that tax collection from foreign citizens is not satisfactory compared to that of the growth of foreign employees in the local and multinational companies, operating in the country.
