The government is going to slap additional taxes on import of more than 50 luxury commodities to put the brake on foreign currency spending. The extra duty will be incorporated in the forthcoming budget to discourage imports of luxuries and combat the prevailing economic crisis.

According to the finance ministry sources, the luxurious commodities include private car with high engine capacity, television, refrigerator, air conditioner (AC), washing machine, oven, tableware, showpiece, chandelier, ordinary light, soap, shampoo, biscuit, chocolate, footwear, tiles, sanitary ware, and alcoholic beverages.

The budget for the financial year 2022-23 will be announced on 9 June. Some 50 to 60 commodities will be subjected to additional import duty, supplementary duty, and regulatory duty at the import stage. The finance ministry has almost finalized the list and it is now going through the finishing touches.

The National Board of Revenue (NBR), earlier on 23 May, issued a gazette notification raising the regulatory duty on imports of 135 commodities from 3 per cent to 20 per cent. The commodities include cosmetics, flowers, fruits and furniture.

In the next budget, import duty will be levied on some luxurious commodities while some others will be subjected to supplementary duty or regulatory duty.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told Prothom Alo that the initiative to raise duty would not bear fruit remarkably. Those who use luxuries do not pay heed to price and will definitely buy the commodities at any cost.

So, import of these products cannot be reduced in this way, he said, adding that the government takes such a step due to its popularity among the people.

“It is quite similar to using ointment,” he said.

Reasons behind additional duty 

Prices of various commodities have been rising in the international market for the last several months. The dollar exchange rate went up by Tk 2 at the banks and by Tk 5 to Tk 7 at the open currency market. All these issues pushed up the country's import costs to a great extent.

Against such a backdrop, the government scaled up the cash margin for opening letter of credit (LC) to maintain a fair reserve of foreign currency. Besides, foreign trips of the government officials were banned, except for the important ones. Later on 23 May, four types of commodities were slapped with additional regulatory duties.

The revenue authorities then refrained from imposing additional duties on relatively less-important commodities and luxuries. The NBR requires the parliament’s approval to impose import and supplementary duties, but it enjoys the authority of imposing a regulatory duty of up to 50 per cent.

The finance and commerce ministries were initially planning to impose a temporary ban on import of some commodities. But the plan did not take a final shape due to the trade liberalization policy of the World Trade Organization (WTO). This is why the government has chosen the option of levying additional duties to keep the country’s forex reserve stable.

Describing the NBR move of duty hike as rational, Md Abdul Majid, a former chairman of the revenue board, told Prothom Alo that it is a must to adopt austerity measures in such a situation of economy.

“Why will we spend foreign currency to import commodities that are not currently essential for the common people? Imposing additional taxes and duties would protect the local industries,” he said.

Md Abdul Majid believes the initiative to discourage import of less important products will be useful in eliminating the prevailing social inequality.

No specific definition of luxuries 

There are around 6,500 commodities in the harmonized tariff chart of Bangladesh Customs. But the authorities did not specify the luxuries and non-luxurious commodities in the chart.

The ‘undesirable’ goods were considered as luxuries in the customs act until 2000. The specification was lifted later under the trade liberalization policy. However, the commodities with a minimum import duty of 25 per cent are unofficially considered as luxuries.

Goods with additional duty 

The government would uphold the existing 20 per cent duty on furniture, cosmetics, flower and fruits in the next fiscal, says a responsible source at the revenue board.

The duty was levied temporarily and is scheduled to expire on 30 June. But the NBR now wants to extend it to next year. The NBR will bag an additional duty of Tk 88 crore if the import flow of these commodities remains normal.

According to the Bangladesh Fresh Fruits Importers Association, the annual import volume of fruits is around 450,000 tons and it meets around 70 per cent of domestic demand. The government collects Tk 2,500 crore as import duty against the fruits.

Regulatory duty hardly declines 

Generally, the regulatory duties that are imposed to keep imports in check do not decline. After assuming power in 2009, the incumbent government had slapped a regulatory duty of 3 per cent on 1,700 commodities in a bid to reduce imports of luxuries.

The commodities with an import duty of 25 per cent were subjected to the decision of regulatory duty hike. However, the duty is yet to be waived or minimized. Some 3,404 products now remain under regulatory duty ranging from 3 per cent to 35 per cent.

In this regard, economist Ahsan H Mansur said, "We are raising the tariff protection by imposing the additional duty, which is conflicting to the LDC graduation."

"We are marching in the opposite direction," he said. “The tariff protection needs to be minimized to reach free trade agreements (FTA) with different countries for expansion of trade and investment.”

Ahsan H Mansur suggested safeguarding forex reserve through monetary policy.