Owning a car to be costlier after June

Annual tax on a car or microbus is likely to go up by 50-67 percent, depending on engine capacity and vehicle type, according to pre-budget documents.

The Bangladesh Road Transport Authority (BRTA), under Section 68B of the Income Tax Ordinance 1984, collects advance income tax from private vehicle owners when they go for vehicle registration or annual fitness renewal.

On top of the tax, vehicle owners have to pay fitness renewal fees, and of course a mandatory insurance premium. The latter is the biggest amount and goes to insurers.

Currently, a sedan or utility vehicle with engine capacity of up to 1,500cc is subject to Tk15,000 in advance tax each year, and it is being proposed to be increased to Tk25,000 from the upcoming fiscal year — a 67 percent rise.

Advance tax on vehicles with engine capacity ranging from 1,500cc to 2,000cc will be Tk50,000 from the existing Tk30,000.

2,000-2,500cc sedans, sports utility vehicles and crossovers will see an advance annual tax of Tk75,000 – a 50 percent increase from the existing Tk50,000.

2,500-3,000cc cars will be subject to Tk125,000 in tax instead of the existing Tk75,000.

Cars with engine displacement of 3,000cc-3,500cc will cost owners Tk150,000 in advance tax – a 50 percent rise.

Finally, big cars with engine capacity higher than 3,500cc will be subject to Tk200,000 in annual tax instead of the existing Tk125,000.

Microbus, perceived as a necessity for organisations and common people, will also see a 50 percent rise in annual tax, reaching Tk30,000 in the upcoming fiscal year, if the plan is finally taken and gets approved in the national budgetary session in the parliament.

In budget proposals, many, including experts, are proposing to impose higher taxes on luxury and non-essential products and services so that the government gets a higher revenue to finance increased allocation in priority areas in the context of the pandemic-hit economy.

However, the debate over how cars should be treated has a long trail in Bangladesh.

Section 68B of the Income Tax Ordinance reads, "Every person owning a private motor car shall be deemed to have an income by which the motor car is maintained and shall pay advance income tax."

A couple of decades of economic growth has helped create a burgeoning middle class that has aspirations for a convenient life despite financial limitations.

After the spread of coronavirus in the country, many families are trying to avail their own car at a price as low as possible in a desperate bid to avoid public transportation while commuting.

"The middle class will refrain from their plan if car price or maintenance cost goes up," said Abdul Haque, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association.

"We requested the government not to increase the cost of owning a car as it is already too costly here. Nearly two-thirds of a car price goes to the treasury," he said.  

His association also has a long-pending request to the government to reconsider its stance on more tax for reconditioned cars.

According to BRTA data up to February last, there are around 5.4 lakh cars, sport utility vehicles and microbuses on the country's roads that have BRTA registration.