Recommendation for slashing spice import duty to stop smuggling

The Bangladesh Trade and Tariff Commission (BTTC) has proposed the National Board of Revenue (NBR) reduce import duties on spices to prevent its smuggling and keep prices within reach of common people.

A BTTC report has identified that some spices are being smuggled into the country to meet spice demand and consequently the government is being deprived of huge revenue.

The BTTC has suggested that the import duties on cumin, cinnamon, cloves, cardamom, black pepper be reduced from 58.60% to 15% in the forthcoming budget of FY22.

Generally, spices are imported in two ways – in bulk and 2.5-kg packets. The commission has recommended a reduction in tariffs only on bulk imports.

The BTTC has prepared the report based on an application of the Bangladesh Wholesale Hot Spices Traders Association.

Analysing the local demand and import data of spices, the commission has found that the local demand for cumin, cinnamon, cloves, cardamom and black pepper is not being imported from the international market. All these products are being smuggled from the neighbouring countries and those who are importing spices legally are losing money in the market due to smuggled spices.

Data shows that the yearly demand of the country is 50,000 tonnes. In FY20 and FY19, 36,000 tonnes and 35,500 tonnes of cumin were imported respectively. At the same time, against the demand of 20,000 tonnes of cinnamon, about 16,000 tonnes and 12,975 tonnes were imported.

In the same period, against the demand for 2,000 tonnes of cloves, 1,594 tonnes and 1,222 tonnes were imported.

In FY20, FY19, cardamom imports were 3,583 tonnes and 5,552 tonnes against the demand for 4,500 tonnes. Also, 1,865 tonnes and 1,426 tonnes of pepper were imported against the demand for 2,500 tonnes.

The commission said that not only the government is being deprived of revenue because of smuggled spices but the traders are also victims of unequal competition because a smuggler can sell a product at a significantly lower rate in the market.

So, to stop smuggling and uneven competition among traders the commission recommends that customs duty is reduced to 15% from 25% and abolish the supplementary duty completely.

A duty of 58.60%, including 25% customs duty, 3% regulatory duty and 20%, is applicable for spice import.

The commission says that revoking such tariffs are unlikely to reduce the government's revenue because if such a decision is taken, import in a legal way will be encouraged.

Bangladesh Wholesale Spices Traders Association President Enayet Ullah told TBS, "In the country, legitimate importers like us are at a loss due to the smuggling of spices. Quite often, the product has to be sold at a loss. On the other hand, the government also loses revenue."

He further said that if the tariff is reduced, the number of smuggled goods will be reduced a lot. Many people will be able to afford it again as the price goes down.

Spice traders say that since there is no production of these products in the country, the demand has to be met by imports. There was a time when these spices were considered luxury products. That is why these imports were subject to high tariffs but as people's quality of life has increased, so have their eating habits. That is why many people are now using these spices and the demand is constantly rising.

At the same time, these spices are again being used as raw material in Ayurvedic medicine which is increasing day by day.
Spices demand and export

Source: NBR and BTTC
 

Spices demand and export

Source: NBR and BTTC