Bangladesh
5 years ago

Advance Tax puts importers in a tight spot

'We are bleeding dry', businesses say

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Importers said they have been bleeding after the slapping of a 5.0 per cent advance tax (AT) on imports, effective from July 01.

Many importers said they require extra money to pay it at a time when the banking sector is facing liquidity crunch.

Liquid assets of the banks plunged by Tk 175.3 billion last June to Tk 2.5 trillion, according to Bangladesh Bank.

According to importers, this is creating an uneven competition in the economy as some privileged zones/areas are enjoying multiple tax exemptions.

This is a problem for those who enjoy exemptions from giving value-added tax (VAT) as they will face much hassle while adjusting it later.

Advance tax is linked with VAT and it is adjustable during the submission of tax returns.

The tax authorities calculate it after imposing key taxes on customs 'assessable values', which inflate the volume of taxable amount, they noted.

But it does not apply the same method on the advance income tax, they said.

The FE found a copy of such documents, which show the customs assessable value at Tk 3,575,662 and one has to pay a 5.0 per cent AT on Tk 4,576,847.

The tax authorities realise AT after adding duty and regulatory duty.

The country's apex chamber body had earlier urged the government to withdraw it from capital machinery and raw materials considering its impact on industrialisation.

But capital machinery and government project materials were only exempted from it, an official at the Federation of Bangladesh Chambers of Commerce and Industry told the FE.

Abul Bashar, a leading commodity importer, told the FE, "We're paying extra money to meet it."

"Who will bear the interest for extra borrowing?" he posed a question.

Mr Bashar said many businesses, who are exempted from VAT, will face much hassle. VAT returns have to be submitted each month.

A Chittagong Customs House official said those having no VAT registration or exempted from VAT may apply to the commissioner concerned to get the refund.

"The issue has clearly been mentioned in the SRO concerned," he said, adding that NBR did it by amending the VAT Act 2012.

On the other hand, Manwar Hossain, managing director at Anwar Ispat, a rerolling mill, said "We feel like bleeding dry".

He said advance tax would put a big burden on those who manufacture goods to cater to the domestic market.

"We are not getting the working capital to meet the requirements for our existing business," said Mr Hossain, chairman of the Bangladesh Steel Manufacturers Association.

"If we are to pay a 5.0 per cent AT on imports, we require additional funds from banks," he added.

Quality steelmakers require fully imported raw materials like scraps or billets to produce rods.

"I don't know how NBR will adjust it," Mr Hossain said, adding that his business has almost started to face difficulty in meeting huge payment of obligations.

"How they (commissioners) will issue cheques and how much time they require -- we all don't know the answer," he said.

FBCCI vice-president Md Siddiqur Rahman said the tax which will be given back should not be imposed because it creates hassle.

"I don't find any logic behind it as the amount will be given back after a certain period."

Economists are of the view that this is a big burden on businesses as the 5.0 per cent is a big sum considering the import volume.

"The government will realise around $2.0 billion in AT, although a fair chunk will be given back," economist Dr Zahid Hussain told the FE.

He said businesses will require a permanent working capital to meet it at a time when getting funds is exceedingly difficult.

"This is not one-time payment, rather it depends on the frequency of imports," added Dr Hussain, who recently retired from the World Bank.

"This is just to show huge revenue mobilisation."

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