This move aims to create a level playing field with investors outside the zones and curb the misuse of these facilities, said NBR sources closely involved in fiscal policy-making.
Workers at a factory in the Korean Export Processing Zone (KEPZ). File Photo: TBS
The National Board of Revenue (NBR) is considering levying duties on the imports of capital machinery, vehicles, and furniture by investors in Export Processing Zones (EPZs) and hi-tech parks who have been enjoying duty-free benefits for decades.
This move aims to create a level playing field with investors outside the zones and curb the misuse of these facilities, said NBR sources closely involved in fiscal policy-making.
The revenue authority is also planning to raise duties on spare parts imported by investors in EPZs and hi-tech parks, especially those parts that are already being manufactured locally.
“We aim to align import duties for investors both within and outside the EPZs. To achieve this, the NBR may impose duties on machinery imports currently enjoying duty-free benefits,” an NBR official told TBS on condition of anonymity.
“We are considering raising import taxes on certain equipment and spare parts that currently benefit from reduced tax rates. Additionally, we plan to introduce import taxes on vehicles for investors in the EPZ area,” he said.
The official, however, declined to specify the exact rates of the proposed or increased duties.
NBR sources hinted that for the import of capital machinery by EPZ investors, a duty of around 1% may be imposed, while for spare parts, equipment, and furniture, the duty is likely to exceed 1%.
Furthermore, for vehicle imports, there may be a substantial increase in import duties, possibly reaching as high as 800%.
“The decision to implement these measures was not solely based on revenue concerns. We also took into account the importance of establishing a level playing field with other investors and addressing the misuse of duty-free facilities,” the official said.
There are allegations that the duty-free benefits are being extensively misused.
During a budget discussion last year, NBR Chairman Abu Hena Md Rahmatul Muneem brought up the issue, saying, “Due to tax benefits, there is still excessive reliance on imports for products that could be domestically produced. We must also prioritise the development of local industries.”
Hinting at tightening the benefits, the head of the revenue authority said, “We will reassess the facilities and make them more stringent. We will no longer provide facilities for importing items like office stationery and chairs. Why should even wooden chairs be imported from abroad with duty-free benefits?”
Investors express concern
However, investors have expressed concerns about the NBR’s new approach, apprehensive of losing reasons for choosing the EPZs.
Shams Mahmud, the managing director of Shasha Denims Limited, a textile factory located in the Dhaka EPZ, told TBS, “If the existing duty and tax facilities are reduced, foreign investors may backtrack on their commitments.”
“When investors initially came to invest in EPZs, they were promised these facilities. However, if any of these facilities are suddenly withdrawn or reduced, it may lead to a loss of confidence among,” he said.
“This not only impacts foreign investors but also hampers local investment. Already, some facilities for EPZ investors have been cut,” Shams added.
Non-EPZ businesses welcome the move
Mohammed Hatem, the managing director of MB Knitwear Limited, a factory based in Narayanganj outside the EPZ, said, “This initiative is commendable if the government aims to create a level playing field between EPZ and non-EPZ zones.”
“However, we also do not agree with any decision made abruptly and without prior consultation with stakeholders,” he said.
Dr Ahsan H Mansur, the executive director of the Policy Research Institute (PRI), told TBS, “There is no justification for differing import tax rates between factories within and outside the EPZs. However, this consideration should have been made before granting these benefits. Sudden policy changes undermine investor confidence.”
Incentives provided to EPZ investors
Factories operating in Bangladesh EPZs since 1983 have been enjoying duty-free benefits and other facilities.
According to the Bangladesh Export Processing Zone Authority (Bepza), factories in these areas currently benefit from duty-free imports of construction materials, machinery, office equipment, and spare parts. They also enjoy duty-free import and export of raw materials and finished goods, relief from double taxation, and exemption from dividend tax.
Furthermore, they are eligible for a tax holiday, which offers a reduced tax rate.
According to both NBR sources and investors, every investor within the EPZ, whether foreign or in a joint venture, enjoys duty-free facilities for each vehicle. Additionally, they receive reduced import tax benefits for spare parts.
Moreover, they are relieved from double taxation and exempted from dividend tax. They also receive a Generalised System of Preferences (GSP) facility for exports from Bangladesh, and remittance of royalty, technical, and consultancy fees is permitted.
Additionally, factories in EPZ benefit from specialised security measures, and trade unions are still not permitted in the EPZ unlike other areas.
An EPZ investor, on condition of anonymity, said, “Some facilities exist only on paper as customs officials are reluctant to recognise Bepza’s certification for duty benefits. As a result, investors are compelled to pay higher taxes or engage in underhand deals with certain officials.”
Md Tanvir Hossain, executive director (Investment Promotion) of Bepza, told TBS, “It is understandable that the government needs revenue, so it is not unusual for the NBR to consider reducing certain benefits. However, it would be preferable if they consult with the relevant authorities before making any decisions.”
According to BEPZA, some 451 factories are operating in the country’s eight EPZs, with investments totalling about $8 billion from 38 countries, employing approximately 500,000 people.
Of these 451 factories, around 300 are primarily related to the garment, textile, and accessories industries.
Fazlul Hoque, the managing director of Plummy Fashions Limited, one of the country’s renowned environmentally friendly RMG factories, said, “We also advocate for uniform facilities both within and outside the EPZs. However, it is crucial to consider that without additional incentives, investors may be reluctant to invest there.”
Import duty on some food items may be cut
According to NBR sources, there are plans to reduce import taxes on certain food items, such as baby food, which are not produced domestically, to stabilise their market prices.
Additionally, the NBR aims to narrow the tariff gap between imported and locally made products.
“Given Bangladesh’s impending graduation from the least developed country (LDC) status by 2026, there is substantial pressure on us to rationalise tariffs and diminish anti-export biases,” explained an NBR official.
“Therefore, we are devising a plan to lower the current high tariff barriers on certain items by either reducing import tariffs or increasing tariffs on locally produced equivalents,” he added.
Over Tk36 lakh earners may face a 5% higher tax
Currently, individual taxpayers have to pay taxes up to 25%. Accordingly, those whose income is more than Tk16.50 lakh, have to pay tax in the highest slab or 25%.
NBR sources said that with the new plan, income up to another Tk20 lakh will be taxed at 25% and 30% tax on the subsequent income. So, a 30% tax has to be paid for income above Tk36.50 lakh.
As a result, about 50,000 taxpayers will come under the additional tax, according to the relevant sources of NBR.
Reyad Hossain is a Senior Staff Correspondent at The Business Standard, who specialises in national and international trade, readymade garments sector, labour issues, the National Board of Revenue (Tax, VAT, Customs) and local trade bodies. His career spans over a decade. He can be reached at
