Middlemen take advantage of tax exemptions depriving consumers

04 March 2021

BENEFITS of tax exemptions on essential commodities hardly reach the end-users as international price fluctuations, hoarding, production and availability of products work as major deterrents. The national exchequer is losing a significant amount of revenue every year because of tax exemptions offered to various types of products and services. But a section of middlemen, not the consumers, are reaping the benefits of such tax waivers.
A World Bank (WB) study shows that the government lost 2.5 per cent of its Gross Domestic Product because of tax exemptions granted to various sectors. The National Board of Revenue (NBR) said the amount would be much higher now as the areas of tax waivers have expanded over the years in the wake of industrialisation, the protection offered to farmers and many large development projects in the public sector. The NBR has long been offering tax waivers on major essential goods including rice, onion, sugar, edible oil, and pulses by issuing Statutory Regulatory Orders (SRO), whenever it sees any price spiral of these items. But any downward revision of tax has little impact on the price situation, although both government departments concerned and private sector players turn to the tax authorities for tax cuts to tame price spiral. Currently, the import of rice is subject to payment of 25.75 per cent tax, onion 10 per cent and edible oil 19 per cent while the tax incidence on sugar is around 60 per cent. The government is now contemplating reducing duty on rice to 15 per cent as the earlier tax cut has had no impact on the prices of the main staple.
Tax adjustment is required not only to control prices in the local market but also to protect the interests of the farmers. The Consumers Association of Bangladesh (CAB) said intensive monitoring of the supply chain could have prevented the middlemen from taking undue advantages of tax reduction. A dynamic taxation system could be devised to adjust import duty in line with the upward or downward trends of essentials' prices in the international market to avoid revenue loss.

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