As a car enthusiast I follow a number of car pages in Bangladesh and recently a post by a car importer caught my attention. This importer was selling a Honda Civic Type R, 2017 model, for 90 lakh taka and had mentioned that they were selling it for a loss. This caught me by surprise. The base model of the car was being sold for £30,995 or BDT 3,453,831 in 2017, which a GT version was two thousand pounds more than the base model, in the United Kingdom. So the asking price of a three year old car is 2.6 times more than the price on its release date in the United Kingdom. Well it makes sense because people in Bangladesh are wealthier than the people in the United Kingdom. Hold on for a second; that does not sound right. Let me check. So the Gross National Income (GNI) per capita of the United Kingdom in 2019 was 42,370 USD while GNI per capita of Bangladesh was 1,940 USD. That is a massive difference. So why is a country, in the lower-middle-income group, paying 2.6 times more than a country that is in the high-income group for a three year old car? It has something to do with our import taxation policy.A report in the Dhaka Tribune quoting the National Board of Revenue reported that there is a 25 per cent import duty which is topped by a supplementary duty ranging from 15 per cent to 500 per cent depending on the size of the engine. There is also a 15 per cent VAT and 5 per cent advance tax. That’s not all; there is also a 5 per cent regulatory tax and 4 per cent advance trade VAT on tariff value. That is too many taxes to place on the import of cars and a 500 per cent tax is beyond unreasonable. It could be justified if we had a large domestic car industry that we are trying to protect but we do not have one. It could be even justified if the government was in the process of developing a domestic car industry but that does not seem to be the case. This tax you could argue is being imposed to reduce the number of cars in the street but looking at our traffic jams I would have to say that is not working. Bangladesh has been flooded with poor quality used, more commonly known as recondition cars, of the questionable quality and history. People in Bangladesh are paying more for old used cars than what a brand new car costs. There is a large Japanese used vehicle exporting industry that exports used cars through auction from car dealers and private owners. These cars are sold in developing countries like Bangladesh. There are a number of reasons why Japan is the ideal choice for importers looking to buy used cars; such as right-hand drive and the cars themselves are reliable with low maintenance cost. The high-import tax meant both importers and buyers were encouraged to buy used cars. This could be seen in the price difference of new and used cars; in 2018 the price of a new Toyota Camry hybrid was 90 lakh taka while that of a four year old “reconditioned” car was around 35 lakh taka. In the United States the base price of the same car was 28,695 USD or 2,434,550 taka. We are expected to pay more for a used old car than someone buying a new car, of the same model, in the richest country in the world. This has not stopped people from buying cars but has forced them to buy old used cars that are more likely to break down and need expensive replacement parts. The tax also inflates the price of used cars in Bangladesh which results in older cars, which would have been scrapped in most countries, still running. These older cars tend to have lower safety standards than brand new car and as such are more likely to be in accidents and accidents with older cars are more likely to result in fatalities. The tax on import of cars is an indirect tax which is an unfair system because unlike direct tax it does not consider income of the buyer. For example someone making 30 lakh taka a month, a 15 lakh tax is 50 per cent of his monthly income; but for someone making 50 thousand taka a month, a 15 lakh tax is equivalent to 30 months’ salary for him. This is a tax that unfairly disadvantages the middleclass; making it costlier for a middle class family in Bangladesh to buy a car than in the United States. Our Members of Parliament have no incentive to change this taxation as they do not suffer from it; they are allowed to import cars tax free. Not only do they not have to suffer from import duties but they stand to benefit by selling the car after using them for a few years. If those law makers buy smart they might be able to sell their cars at a higher price than the price they paid for it.Cuba is known for a unique phenomenon; the streets are filled with US cars from the 1950’s. This is a result of US sanctions imposed after the Cuban revolution that prevent new car from entering the market and the result of the Cuban government strictly controlling and placing high taxes on the import of new cars. Though exceptions were made for communist party officials; incentives which can be described as a dictatorship rewarding loyalists. Our import policy is leading us on the path to become Cuba with old cars that are not safe or road worthy. The provision allowing Members of Parliament to import cars without taxation has a similar origin story to that of Cuba; it was created by military dictator Hussein Mohammad Ershad to reward Members of Parliament loyal to him. So I find myself asking why we have kept a policy of a dictator in a democratic Bangladesh. This law enriches Members of Parliament at the expense of the common man. A law that saves members of Parliament about six core in taxes when they import their favourite Toyota Land Cruiser Prado. I am not asking for the government to deny the duty free benefit of Members of Parliament but I am questioning the necessity of such a large tax on the import of cars and the fairness of the situation. It would be difficult to describe a policy that benefits only a few powerful people at the expense of the majority of the population, a policy that has resulted in our streets filling up with cars with lower safety and emission standards. This policy of high taxations on cars places an unfair burden on the citizens of Bangladesh. Bangladesh is on the path to becoming an upper-middle-income country by 2031 under the visionary leadership of Prime Minister Sheikh Hasina. There is a growing middle class that has aspirations of owning a car; which is becoming possible for more people due to our strong economic growth resulting in higher income for the population. The government needs to lower the taxes so that the bulging middle class can afford to buy new cars. If the government cannot do that then they should at least remove the duty free provisions for lawmakers; after all it would only be fair that public representatives are treated same as the people they are supposed to represent when it comes to taxation.
