Ministry of Economic Affairs(MoEA) held it’s first awareness program on fronting to the business community on 19th of August 2021 in two sessions with different sets of business community and associations.
During the awareness program, officials of MoEA thoroughly introduced the concept of fronting, laws governing fronting, negative impacts of fronting and how to refrain from fronting.
During the fourth session of the 3rd Parliament session business fronting was classified as criminal offence in the penal code (Amendment) Act of Bhutan (PCAAB) 2021.
As per section 284G of PCAAB, it states that a defendant shall be guilty of an offence of fronting, if the leases or subleases, hires or otherwise permits another person to use or operate one’s license unless otherwise permitted by laws or policies.
MoEA has also notified public on July 21, 2021 to refrain from engaging in fronting and requested immediate termination of such arrangements to avoid unnecessary implications with the further notification that any cases of fronting activities detected after December 31, 2021 shall be dealt as per the penal code (Amendment) Act of Bhutan 2021.
Officiating secretary (OS)of MoEA, Tandin Tshering said that fronting affects on the economic security and once the economic sovereignty is lost the chances of country’s independence will be at stake and if there’s any fronting cases the defendant shall be dealt with a felony of the fourth degree.
He also explained that fronting even within the immediate relatives shall not be entertained.
“We issue license to the holder so that he can operate the business, for instance, if the father has ceased operating his construction company for few years due to some lapses and if he is using the license of his son for operating a construction company that shall also be considered as fronting,” said OS.
Tandin also clarified the difference between FDI and fronting. He said that FDI is a formal fronting since the FDI is an incorporated company the company is reliable to pay the taxes whereas in informal fronting the person enjoys the profit solely and refrains from paying the taxes as the FDI.
It was also learnt from the business community that fronting has been common not only within the Bhutanese but also with the foreigners whereby expatriates do the business in Bhutan using the Bhutanese citizen license holder.
“The license holder has to just sit in the front desk and they get payment every month but the expatriates enjoy the profit earned from the business and that’s how our money flows outside. There are plenty fronting happening in the country with the expatriates and government is unaware of it,” said a business man from awareness program who wishes anonymity.
The floor suggested the ministry to create conducive and encouraging atmosphere for the Bhutanese business people to contribute.
Various business men explained the reason for the fronting taking place in Bhutan which is due to the limited quota and they said that if the ministry wants to discourage fronting the quota system has to be encouraged enough for the trader so that people don’t use anybody else’s license and the floor also suggested to discourage ex country legalized traders which is not just causing tremendous economic impact in the country but are laundering billions of money outside the country everyday and affecting Bhutanese traders.
it was observed that the Bhutanese Business community are frustrated with the policy of the trade in Bhutan and the increasing number of fronting done by the Bhutanese with the expatriates is effecting their businesses as well as the well-being of the economic growth of the country.
Meanwhile MoEA will be giving the awareness program 6 regions of the country with different stake holders to discourage people from engaging in fronting and prevent business people from facing criminal charges.