Vol. 4 Num 327 Fri. April 30, 2004  
Front Page

High tax pushes milk powder prices up
Consumers bear bulk of the duties

Consumers have to bear about 64 percent of the taxes levied on imported bulk milk powder, a fact that belies the government's claim that imposition of high taxes on this source of nutrition is justified by public interests.

The taxation previously was even higher, which has come down to the present level with the temporary waiver of the 15-percent supplementary duty since March 15 last.

"High customs and supplementary duties are imposed on luxurious and socially undesirable goods as well as any other products or services imposition of supplementary tax on which is deemed befitting for public interests," an National Board of Revenue (NBR) official said on condition of anonymity, citing the definition of VAT Act 1991.

"We don't have any specific terminology to define commodities as luxurious or essential ones. We impose high tax only when it doesn't affect public interests," said NBR Chairman Khairuzzaman Chowdhury. "The rate of tax on bulk milk powder is low," he claimed.

"The tax-rate on bulk milk powder is 56 percent at the port level," said a top NBR official, who also sought anonymity. "It goes even higher when VAT (value-added tax) on packaging and marketing is added to it."

"As far as my understanding goes, the restrictive measures [of high tax] are meant to protect and sustain the local agri sector and to encourage investment in local production," he said.

Whatever milk is produced locally gets a poor price of Tk 10 to Tk 15 per litre at the grassroots, he said. "So, we need to develop a supply channel of local produce and to draw investors in the milk processing industry, instead of giving subsidy to importers."

As on detergent, the highest rate of customs duty, 30 percent, is charged on milk powder. Whereas, the same duty on tobacco (not stripped/stemmed), tobacco refuse and beverage concentrate is only half of that, 15 percent, with no supplementary duty, according to an NBR source.

"The high taxes make milk powder an expensive item for the end consumers," said SA Mallick, acting managing director of New Zealand Milk Bangladesh Limited, a leading milk powder importer and marketer.

"In view of public health and nutrition, milk powder should be treated as an essential commodity," he said, "and the duties and taxes should be levied accordingly, so that its price becomes affordable to the commoners."

Citing sources at the Department of Livestock Services, New Zealand Milk said the total domestic milk production at present could meet only 10 to 14 percent of the country's total demand, imported milk met 30 percent while the rest remained unmet.

The import tax levied on milk powder in Bangladesh is far too high compared to other Asian countries', like India, Sri Lanka, Indonesia, Thailand and Malaysia, where taxes at the import level range between 5 and 15 percent, as per the New Zealand Milk company reports. The import tax on milk products is 15 percent in India and 12 percent in Sri Lanka.