Import of 300 non-essentials: Tax hike on luxury items on the way

The government is expected to increase the duty and taxes on 300 non-essential and luxury items such as SUVs, mobile phones and home appliances as it looks to rein in imports and ease the pressure on foreign currency reserves.

Vehicles over 3,000CC, washing machines, air conditioners, refrigerators, home decorations, tiles and toys are on the list drafted by the commerce ministry following Prime Minister Sheikh Hasina's directive at a cabinet meeting on July 25 for necessary steps to discourage imports of luxury items.

The list, which also contains non-essential items that are manufactured locally, has been forwarded to the National Board of Revenue (NBR) for necessary action, The Daily Star has learnt from officials working on the matter.

The measure is likely to be discussed at a high-powered meeting today at the Prime Minister's Office (PMO), convened to review the economic situation and challenges originating from the Ukraine war and the escalating inflation.

The issues of slashing fuel prices and distributing another one crore family card among poor households to enable them to purchase daily essentials at subsidised rates will also be discussed at the meeting, which will be chaired by Ahmad Kaikaus, principal secretary to the PM.

The secretaries of ministries of commerce, power and energy, disaster management, agriculture and finance as well as for the bank and financial institutions division and the Bangladesh Bank governor have been asked to attend the meeting, where some important decisions are likely to be taken to weather the ongoing challenges.

The issues have already been discussed at a cabinet division meeting on Wednesday.

At that meeting, a number of secretaries stressed the need for cutting fuel prices and Cabinet Secretary Khandker Anwarul Islam assured them of doing so if the prices in the global market continue to decline, according to cabinet division officials familiar with the discussions.

At the meeting, the concerned secretaries were asked to ensure the procurement of fertiliser to avoid any shortfall. The meeting also decided to monitor the market on a regular basis to prevent hoarding and price manipulation.

The government is also working on expanding food distribution at low prices, according to Shamsul Alam, the state minister for planning.

One crore family cardholders already can purchase rice, lentils, edible oil and sugar at fair prices.

"If inflation continues, we may increase an additional one crore family cards," he told The Daily Star.

Besides them, government is providing rice to 50 lakh families for Tk 15 a kg.

Responding to a question, Alam said, "A highly volatile situation is prevailing in the international fuel market. While the prices are declining in the international market, it may jump."

The fuel prices are likely to be adjusted if the downward trend in prices in the global market continues for another two weeks, he added.

As part of an earlier decision, the NBR has taken initiatives to discourage imports by increasing the duty on 135 products, including flowers, fruits, furniture, and cosmetics by as much as 20 percent. The duty on the items was zero to 3 percent before.

In addition, the NBR will be taking a decision regarding the list of 300 luxury and non-essential items sent by the commerce ministry.

"We are not going for a blanket ban on the import of the non-essential items as that would send out a wrong message to the world about Bangladesh's financial condition," said a top official of the commerce ministry on the condition of anonymity.

The measures are expected to conserve foreign currency reserves, which stood at $39.5 billion on August 16 -- enough to cover about five months' imports, according to data from the BB.

They are also expected to narrow the current account deficit, which hit $18.7 billion at the end of June. A year earlier, it was $4.6 billion.

Earlier, the BB and the commerce ministry took several measures to discourage the import of luxurious items.

The central bank instructed banks to impose a 100 percent margin on 27 types of luxurious non-essential items while opening letters of credit for their import.

For opening letters of credit for imports worth more than $3 million, banks were instructed to inform the central bank 24 hours in advance.