A committee on Saturday urged the government to provide alternatives to cash incentives on export receipts as Bangladesh would not be allowed to support its exporters in the current form after its graduation to a developing country.
The observation was made at a national workshop of the LDC graduation sub-committee on domestic revenue generation and tariff rationalization at the Finance Ministry.
The event was chaired by Fatima Yasmin, senior secretary of the finance division, said the ministry in a press release.
In May last year, the government formed a 22-member national committee to address the challenges that Bangladesh will face as a result of its graduation from the grouping of the least-developed countries (LDCs) in 2026.
Seven sector-specific sub-committees have also been formed to support the national committee.
Ahmad Kaikaus, principal secretary to the prime minister and chief of the national committee, was also present at the meeting.
Once the country leaves the LDC group, the government will not be able to give cash subsidies to exporters although suppliers would face heightened competition in the global markets since the country would lose preferential trade benefits.
The cash incentive and subsidies on exports that don't tally with World Trade Organization's provision should be reduced gradually and alternatives should be explored to keep supporting exporters, said the subsidy study group.
The group carried out a comparative study of Bangladesh's export situation with a country that does not offer export subsidies.
"It found that if there is no cash subsidy on exports, the negative impact would be lower in the long-term. But since the export competitiveness may erode because of the withdrawal of the cash subsidy, the study group is analyzing what alternative arrangements can be made," said the press release.
The group also suggested the government scrap the provision of the local value-addition on exportable goods.
It urged the government to sign free trade agreements and preferential trade agreements with major trading partners to retain duty benefits in their markets. Because of the pacts, the country may run the risk of losing customs duties, it warned.
The study group on reforming tax-related laws and rules called for identifying sectors that should not be given tax-exemption and carrying out full automation and digitalization of the tax administration.
It proposed aligning customs and income tax laws in line with international standards and modernizing processes to fast-track unloading of goods, according to the press release.
The study group on tariff rationalization asked the government to bring down the tariff rates of the products that have gone past the threshold set by the WTO.
It called for phasing out the minimum import price gradually since it is not in line with the WTO Agreement on Customs Valuation, and reducing the para-tariffs and supplementary duties at the import stage gradually.
