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THURSDAY, MAY 29, 2025
Import tax exemption expands 18% despite efforts to rein in

NBR

Reyad Hossain
06 August, 2023, 12:20 am
Last modified: 06 August, 2023, 12:29 am

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Import tax exemption expands 18% despite efforts to rein in

The tax-to-GDP ratio was around 10% a decade ago but came down to below 8% in FY22

Reyad Hossain
06 August, 2023, 12:20 am
Last modified: 06 August, 2023, 12:29 am

Illustration: TBS
Illustration: TBS

The revenue board's repeated talk about boosting revenue by curbing tax exemptions has had no effect in practice as the amount of tax benefits continues to rise.

Tax exemptions on imports alone jumped 18% to Tk61,032 crore in the just concluded fiscal year 2022-23, according to a recent internal report of the National Board of Revenue (NBR).

The report was presented by the customs department at a revenue meeting of NBR last Monday.

Growth in import duty collection increased only 4% in the last fiscal, which is the lowest in the last two decades except for the Covid-19 year of 2021.

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Due to the increase in commodity prices last year, edible oil imports enjoyed about Tk3,856 crore in VAT exemption, which was Tk1,090 crore in the previous financial year, several NBR officials have said.

In addition, some big projects and imports of fuel oil and industrial raw materials were also exempted. The benefit was withdrawn for some products, including edible oil, at the end of the year.

Professor Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem) told TBS, "The government is recommending a reduction in exemptions, but the NBR is walking in the opposite direction."

"Tax benefits are offered to facilitate the private sector, but in reality the expected investment is not coming into the sector,"  he observed.

The economist argued that there should be proper studies before and after exemptions to understand their impacts. "This facility cannot continue for a long time without a real assessment of the economy or the purpose for which it is being given."

Exemptions to increase

Even though exemptions have been reduced or cancelled in some manufacturing sectors in the budget, the NBR expects the amount to increase further in the current financial year.

"The exemption amount may increase by Tk10,000 crore in the current financial year," a field-level commissioner present at the revenue meeting told The Business Standard on condition of anonymity.

"Therefore, we have been instructed to find new or untapped areas to increase revenue collection through VAT," he added.

Tax-to-GDP ratio

Over the past few years, there has been much discussion on increasing the contribution of tax to GDP, but the opposite has been happening, Dr Selim Raihan mentioned.

The tax-to-GDP ratio was around 10%a decade ago. It came down to below 8% in FY22, according to the IMF.

Finance Minister AHM Mustafa Kamal also acknowledged tax exemptions as the main obstacle to the ratio's decline.

In his latest budget speech, the minister emphasised the need to allocate funds to the sectors concerned without giving exemptions.

He said, "Instead of giving tax exemptions, in each case, whether it is project implementation or maintenance work or purchase of essential commodities, the required amount of tax should be allocated in the budget of the related office and required taxes should be paid from that budgetary allocation."

"We should not issue special orders for exemptions unless there is an extraordinary situation," the minister added.

Top exemptions

According to the customs department, in FY23 the import of capital machinery enjoyed the highest exemption of Tk9,656 crore out of 16 major sectors in the country.

Besides, the import of edible oil had the biggest 254% jump in tax exemption. There also were tax exemptions for five other sectors' imports.

Meanwhile, refrigerators and AC manufacture and rice imports did not enjoy any exemption.

Bangladesh / Economy / Top News

NBR / Import / import tax / Tax Exemptions

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