Petroleum remains NBR’s major source of revenue

Petroleum imports continue to be the major source of revenue for Custom House, Chattogram thanks to higher tariffs.

Revenue collection from the import of diesel, furnace oil and other fuels surged 56 per cent to Tk 12,440 crore in the fiscal year of 2021-22 from that a year ago, the highest in a decade.

This was also a fifth of the total collection by the country's biggest customs house in terms of revenue generation, and 14 per cent of the Tk 89,423 crore the National Board of Revenue (NBR) got as revenue from imports.

The issue of revenue collection from petroleum imports came into public discussion following a hike in prices of fuel by the government by up to 52 per cent, with diesel registering a 42 per cent hike, citing reasons for deepening losses of Bangladesh Petroleum Corporation (BPC) for high prices of oil in the international market.

The Centre for Policy Dialogue (CPD) earlier this month said the government could have averted the price hike and reduced losses of the BPC, the country's only importer of petroleum, had it lifted import duty and taxes on the fuel.

At present, the NBR collects a total of 34 per cent tariff, value-added tax and other taxes from diesel, which accounts for 73 per cent of the total fuel – over 65 lakh tonnes -- used in the country.

"Chattogram customs collected more revenue than the BPC's profit from such goods in the last seven-eight years," SM Nazar Hossain, vice-president of the Consumers Association of Bangladesh, told The Daily Star.

"The temporary loss could have been covered if the government removed customs duty and other taxes at the import stage," he said.

According to Hossain, the price hike has affected all sectors, with the price of essential commodities reaching unbearable levels due to the increase in the price of fuel oil.

Petroleum has been one of the biggest sources of revenue for the NBR at the import stage for the last couple of years.

Data from the Custom House, Chattogram showed that it used to collect 17 per cent of its revenue from such fuel oils annually as of FY21. The share of petroleum in revenue collection rose to 21 per cent in FY22.

In addition, the customs authorities collected duties from the private power plants that directly import diesel.

Some 34 per cent import tariff, including a 10 per cent customs duty, 15 per cent VAT, and 2 per cent advance income tax, has to be paid on four products -- furnace oil, jet fuel, diesel, and motor spirit of High-Octane Blending Component or octane.

Similarly, 49 per cent duty is payable on lubricating oil, 28 per cent duty on crude fuel oil, and 31 per cent on base oil.

The tariff rate does not depend on the increase or decrease in the price of these products in the international market. Customs collects revenue by charging a duty of $265 per tonne of furnace oil regardless of the import price.

Similarly, jet fuel, diesel and octane face a fixed assessment rate of 40 cents per litre.

CPD Research Director Khondaker Golam Moazzem said, "There was no need to increase the price of fuel oil if the government only exempted VAT and tax at the import stage."

The finance ministry and the NBR did not want to exempt it due to major revenue generation from fuel products, he said.

"The negative impact on the economy will be many times greater than any government exemption in revenue collection from those products," he said.

The economist says no research has ever been carried out on the extent of the impact on the country's commodity economy and the financial loss due to the increase in the price of fuel oils.

"There is still an opportunity to reduce the price of fuel by giving revenue concessions at the import stage in these sectors. Otherwise, it is not possible to offset the negative impact on the economy even with the higher subsidies given by the government."

A top official of the BPC said they had requested the NBR and the finance ministry to reduce the duty at the import stage but neither agreed to it. As a result, there was no option but to increase the price, said the official.

A member of the NBR says a major part of the board's revenue collection comes from fuel products but the NBR has no objection if the government wants it.

"Because at the end of the day, all the revenue goes to the government treasury. We only keep track of it," he said.