Tariff Policy
Tariff Policy regulates tax on imported and, more rarely, exported goods. It refers to deliberate imposition or withdrawal of tax or changing the existing rate of tax on international trade in pursuit of the government's development objectives. The major objectives of tariff policy are the protection of domestic industries, improvement of the balance of payments position, discouragement of importing demerit goods having negative externality, promotion of exports and simplification of procedure of importing inputs and capital goods for exporters. Tariff policy also has an objective of ensuring that the inputs of domestic products are not subject to tariffs higher than those of competing finished imports.
A major component of tariff policy is the tariff rationalisation in the interests of the entrepreneurs and the consumers with a time-bound phasing for eventual elimination of protection, imposition of tariffs on imports of environment polluting goods, and rationalisation of tariffs on imports which compete with similar domestic goods. Tariffs are usually prescribed through the First Schedule of the Customs Act 1969 to impose import duty and these tariffs are called the 'customs tariff'. However, import tariffs are also contained in the Third Schedule of the VALUE ADDED TAX (VAT) Act 1991 for imposition of supplementary duty (SD) at import stage. The import of goods taxable under the VAT law (ie, goods not specified as tax-exempted in the First Schedule of the VAT Act) is also subject to imposition of VAT. Customs tariff is applicable only for imported goods, but other tariffs are equally applicable for domestic goods and imported goods.
Till 1992-93, there was also 'export tariff' in the Second Schedule of the Customs Act, which was repealed by the Finance Act 1993. Tariffs are imposed and collected by the Customs, Excise and VAT wing of the national board of revenue, the apex tax authority in Bangladesh. Bangladesh tariff commission (BTC), an autonomous body attached to the Ministry of Commerce, is entrusted with the responsibility of recommending the changes in tariffs (mainly the customs tariff) in Bangladesh. Customs tariff was previously based on the Schedules to the Tariff Act 1934, which was partly repealed in 1969 by the Customs Act and was fully repealed in 1980, when by the Finance Act of that year, Section 18 of the Customs Act (which deals with the goods dutiable) was substituted to consolidate the provisions relating to the tariff of customs duty.
Until June 1988, the customs tariff was based on the Customs Co-operation Council (CCC) Nomenclature. From 1 July 1988, this nomenclature was replaced by the Harmonised System Nomenclature, commonly known as the Harmonised Commodity Description and Coding System. The CCC Nomenclature was in the form of a systematic classification of goods comprising 1,011 headings divided among 99 chapters and arranged in 21 sections. Each heading was identified by two groups of two digits each, the first representing the chapter in which the heading appeared, while the second indicates its position in that chapter. On the other hand, the Harmonised System represents a valuable guide to be used for a variety of purposes including the fundamental purpose of customs tariff classification. The Nomenclature under this system comprises 5,019 groups of goods identified by a 6-digit code and is provided with necessary definitions and rules to ensure a correct and uniform application of the same. For the purpose of tariff classification, the Harmonised System provides a legal and logical structure within which a total of 1,241 headings are grouped in 96 chapters arranged in 21 sections.
Bangladesh was one of the first 35 countries to adopt 'Structural Adjustment Facility' (SAF) prescribed by the International Monetary Fund and the World Bank. Bangladesh adopted SAF on 6 February 1987 for a period of three years (1986-89) and also the 'Enhanced Structural Adjustment Facility' (ESAF) on 10 August 1990 for a further period of three years (1990-93). Under the SAF, the major macro-economic objective was the trade and exchange liberalisation. Under the ESAF, the trade liberalisation policy was further expanded with the objectives of 'removal of export subsidies, import liberalisation and further rationalisation of tariff structure'. After the SAF/ESAF fiscal and other policy reforms, the current tariff policy of Bangladesh centres around the import liberalisation through removal or significant reduction of tariff barriers, rationalisation of tariff structures to remove disincentives to domestic production, and export-promotion through tariff-free importation of inputs as well as capital goods. [Swapan Kumar Bala]
