Budget

Indirect Taxes

Customs Duty

Mr. Speaker,

15. I have so far presented proposals relating to dirc i.e., income and corporate, taxes, Now I am placing, throu~ you, before this august Parliament proposals regarding one the very important indirect taxes, i.e., Customs Duties,

Mr. Speaker,

16. In this era of globalization, although ti dependence of the government on customs duties as a source revenue has gradually been decreasing, the major portion such revenues still comes from duties and taxes levied at ti import stage. Value Added Tax (VAT), Supplementary Du (SD), Advance Income Tax (AlT) and Jnfrastructu Development Surcharge (IDSC) are at present collected alor with Import Duties at the import stage, perhaps because it collected in advance and is relatively easy to do so. I believe that the types of duties and taxes and their rates can be significantly reduced once the mindset of the tn-payers undergoes a change for the better and transparency and accountability in tax administration is ensured.

Mr. Speaker,

17. Of the total national tax revenue, customs duty alone constitutes around 28%, which would rise up to 50% if we add to it other duties and taxes collected at the import stage. This revenue earning could have been still higher had the import of around 40% under bond and another 18% duty exempt imports, valued approximately at Taka 60,000/- crore, not been released without payment of duties and taxes. Import duties as a source of revenue has, however, been gradually losing its importance awing to the introduction of free market economy around the globe. Bangladesh, naturally, cannot be an exception to this. As a member of the WTO, we have also to reduce our dependence on import duties. Various rates of import and other duties at different slabs were leviable at import stage. While presenting the budgets for the last two fiscal years, I made commitment to reduce the number of rates of import duties. I also expressed my desire in presenting the budget of the last fiscal year, of reducing the number of customs duties from the existing four and also to significantly bring down the number of existing supplementaiy duties. In fulfillment of that commitment, I now propose to bring the existing four-tier customs duties to three as well as to lower the highest of such rates. The existing four-tier duty rates are 7.5%, 15%, 22.5% and 30%. I now propose to re-structure them to a three-tier rate of 7.5%, 15% and 25%. Similarly, the existing seven rates of supplementary duties leviable on imports of general nature are 15%, 25%, 30%, 40%, 50%, 60% and 75%. I propose to

rationalize and bring them down to 15%, 25%, and 30%. However, in consideration of the soejo-economic realities and the harmfi.il effects of certain items on health and environment, I would propose to retain the existing high rates of supplementary duties, and in a few cases to slightly enhance them.

Mr. Speaker,

18. The list of importable articles now contains a variety of items numbering 6,799. After re-structuring the rates of customs duty and bringing tern down to three from the existing four, the number of zero-rated items would be 519 in place of the existing 541. Likewise, the number of items at 7.5% would be 1510 in place of the present 1,431, and at 15%, 1,879 in place of 1,305. Wit the abolition of 22.5% as a dutyrate, te items numbering a total of 1117 previously falling within this rate, have now found their places in any of the three re-structured rates. With the items numbering 2405 under the existing rate of 30% now falling under the proposed 25% rate and another 569 items brought from other rates, the total number of items under 25% would stand at 2,891. As a consequence of this re-structuring of rates from four to three and based on the present import value, te estimated gains in revenue Would be around Taka 325 crore and the estimated loss would be around Taka 1,100 crore. The estimated net revenue loss would consequently be to te tune of Taka 775 crore (Annexe-'B'). But, then, gains in revenue in nominal ternis from import as a result of inflation, normal growth and restructuring of duty rates is estimated to be around taka 2,000 crore. Administrative improvements resulting from the use of Information Technology in the management of bonded

warehouse system is expected to yield an additional revenue of taka 300 crore. Besides, additional amount of revenue estimated at around taka 1028 crore is expected in consequence of restructuring of duties, improvement in management, speeding up clearance of goods from customs through a wider use of computer technology and over-all administrative improvements. As a result, it would be possible to achieve the revenue target for the fiscal year 2004-2005 fixed at Taka 16,008 crores.

Mr. Speaker,

19. Prices of both crude and refined petroleum have registered a significant rise in the international market. The government is very careful to avoid its adverse impact. With this end in view, we have kept the assessable value of one barrel of crude oil unchanged and fixed at US$ 18.30, despite the same being priced at over US$ 40 in the international market. In addition to this, I now propose to withdraw the existing AdVance Income Tax (AlT) from all types of petroleum as well as to reduce the existing supplementary duty on Kerosene from 25% td 15%, As a result, tax burden on crude oil, Kerosene and all other fuel oil will be reduced by 9%, 25% and 10%, respectively.

20. Considering the importance of the textile sector in the national economy, our government has all along been providing necessary assistance to this sector. In continuation of this and in addition to the facilities already provided, I propose to reduce the existing rates of duty on most of the raw materials and essential machinery and spares needed by this industry 4nnexe- 'B').

Mr. Speaker,

21. The country is now witnessing a very welcome expansion of dairy and poultry farming, in fact agriculture in general, as a result of timely steps taken for their development and expansion by our government soon after it came to power. In order to provide the sector a further boost, I propose to withdraw customs duty and value added tax on most of the capital machinery needed for this sector (Annexe -'B).

22. In order to ensure supply of electricity to far-flung and inaccessible rural areas at a relatively cheaper cost through generation of solar energy, I propose to withdraw customs duty and value added tax leviable on the machinery, parts and components needed for this sector. Private entrepreneurs, I hope, will come forward to take advantage of this and will contribute towards making electricity available to rural areas at a cheaper cost (Annexe -'B').

Mr. Speaker,

23. The country does not practically have any high quality referral hospital of international standard. Many of our citizens are compelled to go abroad for the treatment of life-threatening diseases, although the same is often extremely expensive. Despite our having highly qualified, efficient and experienced physicians and doctors, sophisticated and high-quality treatment of patients is not available in the country for the sheer lack of quality hospitals. I, therefore, propose to withdraw customs duty on medical and hospital equipment and

accessories. I also propose to withdraw all types of taxes and duties on certain life-support systems used in such hospitals. Entrepreneurs, I hope, will come forward to take advantage of this opportunity to establish quality hospitals of international standard to provide good-quality treatment of diseases inside the country.

24. I would now place before this August Parliament a few of the important proposals relating to customs and supplementary duties -

(a) The demand for sugar as a consumer item is quite big. Besides, it is needed as an essential ingredient in the production of biscuits, chocolates, soft drinks, condensed milk etc. In order, therefore, to make sugar available for the production of those items, as also to ensure its supply to the people in general, at a reasonable price, the supplementary duty on this item be reduced from 30% to
150/c;

(b) The present rate of duty on mobile phones is Taka 3,000k and Taka 4,000k per set, depending on the price of such set. This duty is proposed to be reduced to Taka 1,500/- (Taka one thousand and five hundred) only per set irrespective of its price;

(c) About 80% of the papers imported in the country is now subjected to duty at the rate of 30% and the rest at a slightly lower rate. Both these rates are proposed to be unified and re-fixed at 25% across the board; and

(d) The highest rate of customs duty having been reduced and the supplementary duty rates undergoing restructuring, it has become imperative to rationalise duty on motor cars and jeeps. Supplementary Duty on motor cars and jeeps is, therefore, proposed to be re-fixed at 30% in place of the existing 15% on those having cylinder capacity up to 1649. For those having cylinder capacity above 1649 but not exceeding 3,000, it is proposed to be enhanced to 60% from the existing 40%, and for those having a cylinder capacity over 3000 it is proposed to be raised to 90% from the existing 75%.

Mr. Speaker,

25. 1 have been putting emphasis, since taking charge of the Ministry of Finance, on the use of Information Technology (IT) as a means of bringing about efficiency, transparency and dynamism in Customs Administration. I made a mention, while presenting the budget for the fiscal year 2002-2003, of the project undertaken by the National Board of Revenue (NBR), to expedite and simp1i~ assessment and clearance of consignments of import and export through the application of Information Technology. Assessment and Clearance of goods for home consumption and bonded facility as well as the major Custom Houses and stations of the country is being done through computer under ASYCUDA (Automated System for Customs Data) system innovated by UNCTAD. The opportunities for evasion of duty on imports and through the abuse of bonded warehouse facilities have thus been

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significantly cut down as a result of closer monitoring and examination made possible through computerisation. The time for release of goods from customs has therefore been greatly reduced. The National Board of Revenue has already started storing and sending flawless information on import and export to Bangladesh Bank, Export Promotion Bureau, the Bureau of Statistics and other related organisations.
 

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