Dhaka, June 30 (bdnews24.com)—Finance adviser AB Mirza Azizul Islam has defended the hike in duty on capital machinery and raw materials to 10 percent from between 0 and 5 percent saying the move would reduce profit margins slightly, not hit local industry.

The adviser also admitted the budget might be a bit ambitious, but it is realistic in every aspect—size, financing and deficit estimate.

"It is not true that the duty spike will affect industry adversely," Azizul said at a post-budget briefing Saturday to inform the media on the changes made in the approved budget for FY 2007-08.

"Still the gap between the manufacturers who will import at least 50 percent raw materials and importers of the manufactured goods is 49.27 percent without the 20 percent supplementary duty," he said.

The adviser said the gap would go up to 77.87 percent if the 20 percent supplementary duty was included.

"So there is no question of hitting local industry. We've to think also about the interests of the intermediate goods producers," the adviser said.

He made the remarks following questions about businessmen's concerns that the spikes in duty would hit domestic industry hard.

The president approved the Tk 87,137 crore budget on June 28 for FY 2007-08 keeping the proposal to enhance import duty from 5 percent to 10 percent on raw materials and capital machinery and from 10 percent to 12 percent for intermediate goods.

According to a paper presented at the briefing, some 299 HS (harmonised system) code products will miss the 'zero' tariff facility and be included in the new 10 percent duty slab instead of the previous 0 to 5 percent.

Duty for another 1,557 HS code items has increased to 10 percent instead of the previous 5 percent. For 1,780 intermediate goods items, the duty will be 15 percent instead of 12 percent.

National Board of Revenue (NBR) chairman Badiur Rahman said the duty hike, in real terms, would be just 1 percent because of withdrawal of the 4 percent infrastructure development surcharge on all goods and the 5 percent SRO (statutory regulatory order) benefit.

"Moreover 80 percent export-oriented industries will continue to enjoy the previous zero tariff facility," Rahman clarified.

He said the changes in the tax and duty structure initially proposed in the budget will cause losses of about Tk 400 crore to the national exchequer.

The budget that was approved by the president Thursday has reduced the duties on some products, including telecommunication equipment, mobile and fixed telephone sets, paper pulp, computer accessories, air conditioner parts, powder milk, poultry and SIM cards, following suggestions from trade bodies and the public.

Refuting allegations that the budget did not address the spiralling price of essentials, the finance adviser said, "A three dimensional approach—duty cuts, increase of domestic production and alternative marketing systems—has been undertaken to control prices.

The adviser told reporters that the 7 percent GDP growth rate projected in the budget for FY 2007-08 is quite achievable.

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