Ensuring benefit of tax cut on essentials

The national board of revenue (NBR) has decided to cut down on taxes and duties on a number of essential food items in a bid to tackle prices. According to a report published in this newspaper late last week, import duties on onion, potato and pesticides have been cut. These waivers are to last until November 30, 2024. The 5.0 per cent regulatory duty on onion is gone. With regards to customs duty on imported potato, it has been reduced by 10 per cent, i.e. from 25 to 15 per cent. In an effort to reduce prices, pesticide importers are to get benefit of waiver of both regulatory duty and Value-Added Tax (VAT), keeping only customs duty at 5.0 per cent.

This isn't the first time the NBR has cut taxes on these items. The last time this happened was around the beginning of the year and a plethora of waivers and drastic cuts on import duty and VAT was done with the same goal, but with little effect. It simply helped further fattening of the pockets of importers and wholesalers who were glad to accept government largesse, without reducing prices at their respective points of sale! Back then also, media headlines hogged the cuts and the then-government proudly boasted that prices would come down. It did not. None of the imported items back in February registered a downward trend in price, so the question is what guarantee is there that this latest move will not end up as the earlier ones?

Would it not be more judicious to enforce the rules that are already in place whereby cartels controlling the markets be challenged and if need be, incarcerated for overcharging people? That would be a clear demonstration of the new government's intent to actually deliver something tangible to the people, especially the low-income people who have already suffered too much for too many years. It is public knowledge that market imperfections are responsible for inflated prices and regardless of the duty structure imposed by NBR, and the astronomical prices charged continue because regulatory measures are all but absent. On top of all this, the Bangladeshi Taka (BDT) has lost more than a third of its value over the last three years, which means every imported item is dearer by default anyway.

Rather, it would help farmers (and the agriculture sector as a whole) if measures other than duty, VAT and tax cuts were undertaken. There's no point in flooding the market with cheaper potatoes and other items because the only thing that it will do is discourage farmers from growing more of the same in subsequent seasons. And as pointed out by the revenue body, the cut-off date for import is November, so won't it mean business-as-usual afterwards for market syndicates? Instead of following a path that hasn't worked in the past, it would be more prudent for government to strengthen market monitoring so that consumers may not be taken for a ride as they have been in the past. Revisit the laws that govern the penalty system for errant importers, traders and plug the loopholes in the system that allow for artificial raising of prices in the first place. That would have far greater impact on prices. Besides, the government might consider bringing down diesel price further to help reduce cost of production at the growers' level.