12:00 AM, June 04, 2010 / LAST MODIFIED: 12:00 AM, June 04, 2010

Govt to plug loopholes in car import duties

Extra Tk 1,000 crore earnings likely; new move evokes mixed reactions

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Jasim Uddin Khan

The government has set a target to earn Tk 1,000 crore in additional revenue from car imports next year by adopting new measures in the upcoming national budget.
It now earns around Tk 3,000 crore in tax on the imports of 25,000 reconditioned and 3,000 new cars a year.
The tax administration alleges that some importers dodge crores of taka in taxes by manipulating the ages of used cars. There are 20 percent to 350 percent duties on the imported cars of different ages.
The National Board of Revenue is working on developing a new mechanism to avert such tax evasion.
New car importers will have to show prices to be provided by manufacturing companies themselves, instead of any third party. The old car importers will have to have a mandatory inspection from Japanese inspection companies from the next fiscal year.
The pricing of new cars, determined by a third party for the importers, creates scope for under-invoice at the customs point, said an NBR official.
"The government is likely to make pricing by any manufacturing company mandatory for importers to check tax dodges."
Meanwhile, the finance minister has already asked the NBR officials to identify the loopholes in customs valuations to avert tax dodging.
“Soon we'll bring those tax dodgers under a regulatory regime,” said the revenue board official.
The new move evokes sharp reactions from the traders. Many think this will make car imports much expensive.
Car prices vary and cannot be static, said Dhaka chamber's former president Hossain Khaled.
Khaled is also the managing director of AG Automobiles, the distributor of US carmaker Ford Motors in Bangladesh. “Distributors can some time supply cars with varied prices to different customers. We can supply 80 units of cars to the Bangladesh Police at a more competitive price,” he explained, adding that such static pricing would create huge controversy at customs points.
DHS Motors Director NAT Rouf, however, welcomed the move saying his company provides original prices from the manufacturing company.
“The present pricing system is not level playing for all operators. Pricing by third party traders makes room for under-invoice. The government is losing huge amount of revenue for such malpractice,” Rouf pointed out.
Habibullah Dawn, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida), said mandatory inspection will push a used-car price up by $70.
“If anyone wants to manipulate car age, such inspection will not do, ” he said.
Former Barvida president Abdul Haq said it would be a burden on the middle-income group, the main buyer of used cars.
In another development, the Anticorruption Commission is continuing a probe into an alleged manipulation in pricing by some car importers. They are said to have not shown actual prices of the cars imported between 2005 and 2008.

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