Tax measures likely in next budget to discourage luxury goods imports

Al Amin :
Tax measures are likely to be taken in the next budget for the fiscal year (2024–25) in line with discouraging imports of luxury items and boosting local manufacturing sectors.

“Due to tax measures, imported luxury items will get dearer, and the initiative will save the country’s eroded foreign currency reserve, which now stands at below $20 billion,” NBR officials said.

They further said the initiative will also help boost local industries and attract much-needed foreign investment in the country, which is very low.

Following an increase in regulatory duty on the import of 135 items, including cosmetics, flowers, fruits, and furniture, the NBR is planning a bigger hike for the next fiscal year.

At present, an import is subject to customs duty, advanced income tax, value-added tax, supplementary duty, and regulatory duty.

Although the revenue authority has yet to draft a list of items that can be treated as luxury, generally high-tariff value items are being considered luxury goods.

“The AIT for some items can be increased, or the supplementary duty or the rates for all tax components can be raised, as we have no option to increase customs duty for the items,” an official of the revenue board told The New Nation, wishing his anonymity.

But items like cars, refrigerators, and air conditioners will most definitely become more expensive, the official added.

The move is expected to preserve the precarious level of foreign exchange reserves, he said.

At the same time, the government is hoping it will give impetus to the “Made in Bangladesh” agenda.

It is expected to encourage the local manufacturers of home appliances and improve the quality of their merchandise so that importing those items would not be necessary in the long run.

In a push for the ‘Made in Bangladesh’ plan, the government will also slash corporate tax rates by 2.5 percentage points for both listed and non-listed companies that are in manufacturing.

For listed companies, the corporate tax rate will come down to 17.5 percent. But for banks and mobile operators, the corporate tax rate will remain unchanged.

The move is expected to also encourage companies to get listed with the bourses, which are in need of quality stocks.

For non-listed companies, the corporate tax rate would come down to 25 percent, according to the draft.

But the businesses alleged that they would fail to benefit from the reduced corporate tax unless the existing cash transaction condition was withdrawn.

Currently, a non-listed company can avail of the reduced tax benefit if it uses bank transfers in order to receive all revenues and receipts, make all single transactions exceeding Tk 5 lakh, and execute expenses and investments worth more than Tk 36 lakh annually.

“More than 80 percent of Bangladesh’s economy is informal. So, it is not possible for companies to take advantage of the reduced corporate tax rates,” said FBCCI President Mahbubul Alam.