FBCCI wants tariff wall lowered by 10% in 7 years

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) wants the import duty to be slashed by 10% from the existing 25%, gradually by 2030 to help the country comply with the World Trade Organisation's tariff structure. 

In its proposals sent to the Tariff Commission, the FBCCI also seeks reduction in import duty to as low as 1%-5% for machinery, essential goods and basic raw materials.

The country's apex trade body also wants a more structured duty plan, including supplementary duty and regulatory duty.

FBCCI sources told The Business Standard that the association had prepared a suggestion and sent it to the Bangladesh Trade and Tariff Commission, a commerce ministry wing tasked with drafting tariff policy – on 9 January.

Manzur Ahmed, advisor of the FBCCI who was involved with the committee to prepare the suggestion, told TBS, "Bangladesh's average tariff is highest not only in the least developed countries (LDCs) but also in South Asia. Thanks to these high tariffs, some local industries are getting protection for a long time but consumers are paying more. So, it should be rationalised."

"But since it is not possible to reduce tariffs in a single budget year considering revenue, we need a timeline up to 2030. Every budget from the next fiscal year should reduce tariffs gradually," he added.

Business representatives also believe that to prepare for graduation from the LDC status, Bangladesh needs to gradually rationalise tariffs, which include lowering the import duty, alongside protecting the local industry in order to establish a healthy market competition. 

According to sources, the FBCCI also seeks a reduced 5% import duty for machinery, spare parts and intermediary raw materials, 1% for basic raw materials and intermediary raw materials which are not being produced locally, and 1% for machinery and essential goods.

The trade body also suggested quantity-based import duty in some cases, such as vehicles, iron and steel, fuel and energy and gold.

"Currently, there is no structured duty rate for raw material and machinery and other product imports. So, it should be done in a structured way," said Manzur Ahmed. 

The chairman of the National Board of Revenue (NBR) also said on several occasions that tariffs would be revised down but it did not happen in reality, presumably due to a fear of massive revenue loss from imports.

Farid Uddin, a former NBR member, told TBS that the FBCCI's proposal is incomplete. "What will happen if only the import duty is reduced from 25% to 15%? What about other duties such as the high supplementary duty and regulatory duty? Decisions should be taken together on these issues by conducting impact assessments."

A senior official of NBR's Customs Department, on condition of anonymity, told TBS, "The NBR has already forwarded its opinion on the tariff policy to authorities concerned. Besides, the NBR is working under the committee formed by the Prime Minister's Office for trade rationalisation."

Last November, the tariff commission formulated a draft tariff policy which did mention the gradual reduction of tariffs without giving any timeline. 

The commerce ministry held a meeting in November with the stakeholders including the NBR and the FBCCI and sought their opinions regarding the policy.

In response, the FBCCI sent its suggestions to the tariff commission on Monday.

A number of trade experts and economists have also been pushing for lowering tariffs for a long time, saying the higher tariffs create an uneven playing field among importers and local industry.   

Policy Research Institute (PRI) Chairman Dr Zaidi Sattar said the average import duty in Bangladesh is around 14%, while the average in least developed countries is 8.5%. 

If the regulatory duty and supplementary duty are calculated, the average tariff in Bangladesh stands at 28%. Only a few African countries may have higher tariffs than this. Otherwise, the average tariff in all countries is lower than that of Bangladesh, Dr Zaidi added.

According to economists, as a result of higher tariffs, consumers have to purchase goods at an increased price, which incites inflation, and an anti-export bias is created among the local industries of the same product as they are focusing on selling products in the domestic market instead of exporting.

After the graduation of LDC, Bangladesh has to make free trade agreements with various countries to keep the export business normal. But exporters and economists feel that the additional tariff may stand as a barrier in this regard.

Dr Mostafa Abid Khan, a tariff expert and also advisor of the committee on the tariff policy, told TBS, "Tariff protection should be rationalised and time-bound, so that the industries, which enjoy the benefit, can make themselves strong competitors. Otherwise, they will not learn to stand on their own feet."

"Once the tariff policy – which will bring such taxes in line with the World Trade Organization's bound rate – is finalised, it would help sustain the country's industries and also reduce the excessive tax burden on the consumers," he added.