Advance Tax puts importers in a tight spot

MNA Business Desk: Importers said they have been bleeding after the slapping of a 5.0 per cent advance tax (AT) on imports, effective from July 01. Many importers said they require extra money to pay it at a time when the banking sector is facing liquidity crunch.

Liquid assets of the banks plunged by Tk 175.3 billion last June to Tk 2.5 trillion, according to Bangladesh Bank.

According to importers, this is creating an uneven competition in the economy as some privileged zones/areas are enjoying multiple tax exemptions. This is a problem for those who enjoy exemptions from giving value-added tax (VAT) as they will face much hassle while adjusting it later. Advance tax is linked with VAT and it is adjustable during the submission of tax returns.

The tax authorities calculate it after imposing key taxes on customs ‘assessable values’, which inflate the volume of taxable amount, they noted. But it does not apply the same method on the advance income tax, they said. The FE found a copy of such documents, which show the customs assessable value at Tk 3,575,662 and one has to pay a 5.0 per cent AT on Tk 4,576,847. The tax authorities realize AT after adding duty and regulatory duty.

The country’s apex chamber body had earlier urged the government to withdraw it from capital machinery and raw materials considering its impact on industrialization. But capital machinery and government project materials were only exempted from it, an official at the Federation of Bangladesh Chambers of Commerce and Industry.

Many businesses, who are exempted from VAT, will face much hassle. VAT returns have to be submitted each month.

Economists are of the view that this is a big burden on businesses as the 5.0 per cent is a big sum considering the import volume. Businesses will require a permanent working capital to meet it at a time when getting funds is exceedingly difficult.