Tariff cuts on some 350 items likely in new budget

A slew of business-friendly measures, including tariff cuts on nearly 350 items, may be stipulated in the upcoming national budget in a taxation remodelling by the new government.

In a move to rationalise trade taxes, the National Board of Revenue (NBR) lately plans to reduce customs duty on around 70 items, regulatory duty on 210 items, and supplementary duty on 60 items.

The National Tariff Policy and Trade Facilitation Agreement (TFA) has been followed to rationalise the tariffs, officials say.

Revenue officials say the proposed changes are carefully designed to ensure that local manufacturers do not face undue pressure.

The items under consideration include consumer goods, spices, a wide range of ICT products, such as finished computers, monitors and laptops, as well as solar equipment, fish, meat, and raw materials for electric vehicles (EVs).

Officials say the government aims to bring the import tariffs on ICT products below 10 per cent in the upcoming budget.

A new tariff slab and HS codes are also set to be introduced to facilitate the import of electric vehicles, they add.

Dr. Masrur Reaz, founding chairman of Policy Exchange Bangladesh, says tariff rationalisation has long been a demand of industries dependent on imported raw materials.

"It is a welcome move as high import tariffs have significantly increased production costs for industries," he says.

On EVs, Dr. Reaz notes that facilitating their use would help Bangladesh meet environmental -compliance requirements.

He also points out that many ICT products subject to high import duties are not manufactured in Bangladesh.

"As we move towards a digital economy, the ICT sector should receive policy support to flourish," he adds.

A major change in VAT compliance is also expected, offering relief to businesses from the requirement of filing monthly VAT returns. From the upcoming fiscal year, businesses may be allowed to submit VAT returns on a quarterly basis instead.

In addition, source tax on the local procurement of raw materials is likely to be reduced by one-percentage point.

However, the entire amount of source tax paid would either be adjustable against tax liabilities or refundable for corporate taxpayers.

Businesses would also be allowed to claim refunds for excess taxes paid if they are unable to adjust them over three consecutive tax years. Officials say the shift towards a more business-friendly tax regime follows instructions from the Prime Minister, issued last week.

A senior tax official says a major reshuffle has been made to the NBR's budget proposals following a meeting with the Prime Minister.

"We are moving towards a more predictable tax regime by fixing tax rates for individual and corporate taxpayers for the next five years," he said.

"The government's priority is now trade facilitation rather than revenue collection through aggressive taxation measures," he adds.

Small traders welcome the proposal to introduce quarterly VAT returns as they feel it would reduce compliance burdens.

"Large companies can afford dedicated officials to maintain compliance and submit VAT returns, but that is difficult for small businesses like ours," says Solaiman Parsee, proprietor of Faial and Brothers in Old Dhaka.

The trader, who mainly imports and sells hardware products, says business hubs such as Old Dhaka are still dominated by traders who are more comfortable with manual record-keeping systems.

Speaking to The Financial Express, Metropolitan Chamber of Commerce and Industry (MCCI) President Kamran T. Chowdhury welcomed the move to simplify VAT-return submissions but called for the withdrawal of turnover tax on businesses.

"It is unjust to impose tax on turnover. It goes against the fundamental principles of taxation," he argues.

He also recommends allowing businesses to adjust or claim refunds for excess taxes paid on an annual basis, instead of waiting for three years.

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