The new budget has confirmed that the import of fire safety equipment and building materials will be duty free.
We welcome this move as it provides a practical way to encourage improvements and support relocations in the RMG industry. Around 1,200 RMG factories need to install sprinklers, and at least twice as many are estimated to need fire doors. Using duty rates to provide cost reductions in this key export sector is the right way to apply taxation policy.
The general principle that should be applied when reviewing taxes is to use policy to incentivise productivity and support public goods, and to tend to raise taxes to disincentivise activities with more negative impacts.
Measures which could be said to meet the latter criterion include the government’s proposal to bring in a green tax on environmentally-polluting activities and its decision to raise taxes on tobacco.
Nonetheless, there are still areas in which the policy needs to become more joined up so that tax and incentive measures do not send mixed messages.
For instance, scarce taxpayer funds are spent excessively on subsidising energy and gas, creating huge inefficiencies and waste. The decision to cut some subsidies on energy and power is therefore a step in the right direction. However, this decision is arguably contradicted by the significant cut in duties on the import of private cars in the 1701-2750cc range.
Similarly, the price increase for energy-saving LED lamps appears to send the wrong signal.
Policymakers have to balance a huge amount of priorities. It is important they keep reviewing tax and incentive measures to keep them focused on the greater good.
