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The Financial Express

Are we running backwards?

| Updated: October 24, 2017 11:04:14


Are we running backwards?

The automobile industry could be one of the invigorating industries in this country. The quintessential perk of any new prospective industry is new employment opportunities. Furthermore automobile industry will fuel up foreign direct investment and help to grow ancillary industries involving automobile maintenance, fuel and service. Yes, it requires modern technology and infrastructure. So far, many local companies are making every effort to build cars and also gained international accreditation.
Unexpectedly, the government is retro-pedalling since import duty for automotive industry has been restructured in the proposed budget 2017-18. The government has proposed an increase in the regulatory duty for Completely Knocked down (CKD) vehicles from 3.0 per cent in 2016-2017 to 30 per cent in 2017-18. Furthermore, the supplementary duties in different categories have been increased without prior discussion with industry investors. Possibly, government wants to provide more incentives for local growing industry.
For instance, an importer will have to pay nearly 203 per cent of govt. taxes while importing a 1600-2000 cc CKD vehicle. However, if the importer imports that particular vehicle in completely built up (CBU) condition the total tax incidence will be 212.37 per cent. The gap is only 9 per cent whilst govt. has a commitment to maintain a minimum of 40 per cent gap to spur the local industry. This creepy decision will cause a huge loss for many local companies having huge investments in vehicle assembling factories. Moreover, sudden increase of supplementary duty will also cause considerable loss since many importers have a good number of vehicles in import pipeline which are already sold in previously agreed price.
The number of new cars sold annually is considered as a reliable indicator of the nation's economic health. However the market size of brand new cars in Bangladesh is still very low due to buying power of country people and current tax structure as well. The government should address these issues to further encourage the industry.
Bangladesh is a growing sensation for its emerging economy. Amid worldwide economic stagnation and too many domestic obstacles the country has been showing commendable performance in maintaining steady economic growth. We urge upon our authorities to make every effort to pave the way for this new promising industry.   
Farid Al Shohan
[email protected]
 

 

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