The government has moved to slash import taxes of two key essentials -- diesel and rice -- as high food and fuel prices amid boiling inflation hits hard ordinary people.
The major step comes following instructions from government high-ups as the commoners are struggling to manage surging household and living expenditures, official sources say.
Both the commodities, widely consumed by the multitudes, would see significant cuts in import taxes, they hinted.
The total import taxes or total tax incidence (TTI) on diesel might be trimmed down to 10.25 per cent from the existing 34 per cent.
Also, the government has decided to bring down the import duty on rice to 15.25 per cent from 25.75 per cent, the sources said.
Officials said the customs authority under the National Board of Revenue (NBR) is working on preparing a summary on reduced customs-duty structures for the two key food and fuel items.
According to NBR data, the government received Tk 115.90 billion in import taxes from petroleum products against its import value worth Tk 450.62 billion in FY 2021-22.
In a recent letter, dated August 14, 2022, to Prime Minister Sheikh Hasina, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) sought withdrawal of the existing duty and taxes from fuel oils.
The apex chamber also demanded readjustment of the prices of the petroleum products in greater interest of the people.
In the wake of a global crunch stemming from pandemic and war, the government raised prices of petroleum products like diesel, kerosene, octane and petrol by 47 per cent on average on August 6, 2022. Diesel price was hiked above 42 per cent to Tk 114 a litre.
In a cascading impact, price hike of diesel triggers rises in prices of other commodities as transportation fares are linked with the fuel.
Following a steep hike in the key transportation fuel, transport owners made a 35-40- percent hike in fares of goods-carrying vehicles.
Prof Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), suggests the prices of fuels should be readjusted to pass on benefits of the tax cuts to the consumers and producers.
"As fuel price is administered in Bangladesh, it should be determined how the relevant sectors, including agriculture and transportation, can get benefit of the decision," he says.
Usually, downward adjustment of prices is difficult in the country once it went up, so the government has to renegotiate with sectors after reduction in taxes on diesel, he adds.
On import of rice, he expressed the similar views as on diesel to pass on benefit of tax cut to the consumers.
On June 23, 2022, the government cut import taxes on rice to 25.75 per cent, upon approval of the ministry of Food, from earlier 62.5 per cent until October 31, 2022.
However, the sources wouldn't confirm whether the government would keep the reduced tax benefit valid until the timeframe considering Boro-harvesting time.
The government has increased diesel price by Tk 34 to Tk 114 per litre, octane by Tk 46 to Tk 135 and petrol by Tk 44 to Tk 130 per litre. The price of kerosene was also increased by 42.5 per cent to Tk 114, in the across-the-board raise.
Existing TTI (total tax incidence) on petroleum products is around 34 per cent inclusive of 10-percent customs duty, 15-percent value-added tax, 5.0-percent advance tax and 2.0-percent advance income tax.
Dhaka Chamber of Commerce and Industry (DCCI) president Rizwan Rahman observes the
tax cut on those two items "is not a favour but necessity now".
Around 3.0 per cent of diesel is consumed in agriculture sector, he notes about the necessity of lowering price of the agro-input.
He expects cooling down of inflation as an outcome of this decision on fiscal intervention.
Mr Rahman, however, feels that the government will have to ensure that consumers are getting benefit of tax cuts.
