Budget may raise import duties to safeguard local industries

Local manufacturers of products ranging from man-made fibre and plastics to glass, steel, bicycles and paper could receive greater protection under the budget to be proposed today (11 June) through higher import taxes on competing goods, a move that may support domestic industries.

At the same time, the government is considering duty reductions on several industrial raw materials, which could lower production costs for some sectors and create room for lower prices.

However, questions remain over how much of those benefits would ultimately reach consumers.

Industry stakeholders, however, say raising import duties can be justified only when local manufacturers have sufficient production capacity and can ensure product quality. Otherwise, consumers may face higher prices without receiving adequate alternatives.

Anwar-Ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries, told The Business Standard, "If higher taxes are imposed on similar imported products to protect local industries, but those manufacturers have only 10% to 20% supply capacity, the policy will not produce good results. The quality of those products must also be considered."

"If import taxes are increased in the name of protection without examining these issues, consumer costs will rise. Instead of restricting imports, the government could reduce raw material costs for those industries and provide subsidies and other fiscal support," he added.

Products facing higher import duties

Several large investments have been made in polyester staple fibre production in Bangladesh in recent years.

To protect those manufacturers, a 5% customs duty is set to be imposed on imports of polyester staple fibre, a key raw material used in the ready-made garments and non-leather footwear industries.

The government is also considering raising customs duties on imported PVC and PET resins from the existing 5% to 10%. Significant investments have been made in the local production of these plastic industry raw materials over the past few years.

Similarly, imports of gypsum boards and sheets may face a 20% regulatory duty. Customs duty on imported bicycles could increase from 15% to 25%, while a new 5% regulatory duty may also be imposed.

To provide additional support to local washing machine manufacturers, a 20% supplementary duty may be imposed on imports. For the paper industry, supplementary duty on greaseproof paper and glassine paper could rise from 10% to 25%, alongside a new 5% regulatory duty.

A 10% regulatory duty may also be imposed on imports of cold-rolled coils and sheets to protect domestic manufacturers.

Imports of transformers could face an increase in supplementary duty from 10% to 25%, together with a new 5% regulatory duty.

For copper wire and copper tubes, a 10% regulatory duty may be imposed, while customs duty on copper tubes could increase from 15% to 25%. Customs duty on maize starch may also rise from 15% to 25%. In addition, a 10% regulatory duty may be imposed on DC motors with capacities below 1,200 watts.

Sector insiders say these additional taxes could increase import costs and ultimately raise consumer prices. They also note longstanding concerns that, even after receiving policy support and tax benefits, some industries do not always pass on the resulting cost savings to consumers.

Duty relief for industrial raw materials

Today's budget may also include duty reductions on a range of industrial raw materials.

Customs duty on five raw materials used in refractory cement production, including ball clay, may be withdrawn. Customs duty on five types of raw materials used in float glass manufacturing could be reduced from 25% to 15%.

For the detergent industry, customs duty on imported Linear Alkyl Benzene, a key raw material, may be reduced to 1%. Reduced import tax rates are also being considered for two raw materials used in tyre and tube manufacturing.

In the skincare and beauty products sector, supplementary duty on two raw materials could be reduced from 30% to 10%.

Meanwhile, the government is considering withdrawing the existing 5% regulatory duty on key raw materials used by the coffee processing industry.