Petroleum-price hike pays govt high revenues as value-added tax (VAT) collection from the marketing of petroleum products grew nearly 94 per cent last financial year, which economists believe has backlashes.
Five petroleum-marketing companies under the state-owned Bangladesh Petroleum Corporation (BPC) in the FY2022-23 nearly doubled to Tk 75.76 billion from the previous year's amount, by official count.
Jamuna Oil Company Ltd, Meghna Petroleum Ltd, Padma Oil Company Ltd, Standard Asiatic Oil Company Ltd, and Eastern Refinery Ltd paid VAT worth Tk 39.13 billion in the FY2021-22.
In FY2020-21, the companies had paid Tk 28.99 billion VAT to the exchequer.
Chattogram VAT zone collects the tax from the BPC's five companies.
Aggregate collection of VAT from BPC, including arrears, stood at Tk 79.14 billion, up 74 per cent from previous year's, according to data compiled by Chattogram Customs, Vat and Excise Commissionerate.
The zone collected Tk 3.38 billion in outstanding amount through issuing demand notices on the basis of audit of the VAT returns of the companies.
However, collection of arrears was Tk 6.31 billion in FY22 and Tk 5.19 billion in FY21.
Officials said substantial rise in petroleum prices on the local market contributed to the hefty growth in VAT receipts from petroleum products, alongside intensified efforts by the officials concerned.
In August 2022, the government pushed up the prices of petrol and octane by 50 per cent and diesel and kerosene by 36 per cent on grounds of price rises on the international market under the impact of the Russia-Ukraine war.
Syed Mushfequer Rahman, Commissioner for the Chattogram VAT zone, says revenue from BPC plays a vital role as it constitutes more than 55 per cent of total VAT collection under this zone.
"Overall growth for Chattogram VAT zone is 40 per cent last FY. We exceeded our target by 15 per cent. It's due to our effort on collection from large taxpayers, including BSRM, Abul Khair, KSRM, GPH etc."
Audit also played a key role too in collection of due VAT from the businesses, he adds about the drives to make the most out of the available sources of revenue.
"The VAT zone has made good progress in arrears collection, too," he says.
However, economists have found the high tax on the essential inputs as regressive one as it is triggering inflationary pressure on the economy.
At the sixth Sanem Annual Economists' Conference (SAEC) 2023 last February, eminent economist Dr Wahiduddin Mahmud said universal intermediate input like fuel should not be a major source of VAT- revenue collection.
Earlier, the Centre for Policy Dialogue (CPD) also had recommended the government for downward adjustment of fuel prices by Tk 10 per litre considering declining trend in the international prices.
Petroleum prices have not been adjusted downward since 2013 even though international prices have dropped.
A study by the CPD showed the government had made a profit of about Tk 420 billion over the past seven years by selling petroleum products. The government determined the fuel prices alone for the market.
In the current budget, the government tried to change the tax-collection method from fuel oils by introducing a specific duty.
However, it backtracked on the move as the method might cause a further surge in fuel prices.
Total tax incidence on petroleum products is 34 per cent in Bangladesh inclusive of import taxes, advance tax (adjustable), VAT and advance income tax.
Distinguished fellow of the Centre for Policy Dialogue Prof Mustafizur Rahman regrets that consumers are paying high prices when petroleum-product prices go up on the international market but not getting any benefit when it goes down.
Prices of fuel oils are linked with production-competitiveness, entrepreneurs and investors, he says to remind authorities of the domino effect of fuel-price pushes.
"It's high time the government took policy decision to adopt market-based pricing method for fuel oils as India," he suggests, adding: "Fuel is a mother commodity so fiscal measures to mobilize revenue from the products should not be prioritised."
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