Report No. 7196%-D

BangladeshAn Agenda for Tax Reform(In Three Volumes) Volume It: Indirect Taxation: Policy tnd AdministrationDecenber IS, 1989

Public Economics Divis;onCountrv Economics Department

Policy, Planning and Research

FOR OFFICIAL USE ONLY

Documet of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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BANGLADESH

CURRENCY EOUIVALENTS

The estimated value of the Bangladesh Taka (Tk) is fixed inrelation to a basket of reference currencies, with the U.S. Dollarserving as the intervention currency.

1989

US$1 - Tk 33Tk 1 - US$ 0.030

WeiLhts and Measures

1 Crore - 10 million

FISCAL YEAR

July 1 -- June 30

FOR OMCIAL USE ON

BANGLADESH: AN AGENDA FOR TAX REFORM

VOLUME II

Table of Contents

CHAPTER 2: INDIRECT TAXATION: POLICY

Page No.

I: TRADE TAXATION ........................................... 1

1. Imports ............................................... 12. Quantitative Restrictions . ............................ 43. Exports ............................................... 6

II: DOMESTIC INDIRECT TAXATION ..................... ......... 7

1. Excise Taxation ........ 7Presumptive Taxation ........ 7

III: FEATURES OF INDIRECT TAXATION ........ 10

1. Intermediate Goods Taxation ........ 102. Protection ........ 12

IV. REFORMING INDIRECT TAXES .. 13

I. Need for Reform ........ 132. A Desirable Tax Structure ........ 153. Comparative Experience with VAT ............ .......... 17

Rate Structure ........ 18Revenue Growth ........ 20

4. Coverage of a VAT ........ 225. Existing Instruments ........ 22

A. Input Duty Relief for Exports ........ 22

CDST Revief ........ 22Excise Tax Relief ........ 23

B. Input Duty Relief for Domestic Production ........ 24

CDST Relief ............... 24Excise Tax Relief .24

6. Assessment of Drawback/Relief Procedures .24

Exports .24Domestic Production .26

This document has a resuicled distrbution and masy be used by rocipients only in the performance|of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.|

zpge E.

7. Rationale for Proposed VAT Variant .................... 26

A. Crediting ..................................... 26B. The Consumption Base ............................... 27

V. PHASING IN A VAT ......................... 27

VI. REFORMING TAXES TO RAISE REVENUE ........................... 29

1. Exclses: Revenue and Distributiou. ...................... 29Cigarettea ................................ ............ 31

2. Public Sector Pricing .34Power and Gas .35

3. Other Revenue-Raising Measures .38

A. Trade Regime .38B. Tax Administration .40

CHAPTER 3: INDIRECT TAXATION: ADMINISTRATION .49

I: INTRODUCTION .49

1. Background .492. Existing Organization .50

A. National Board of Revenue .50B. Auxiliary Organizations .50C. Field-Level Organizations .52

3. The Recommendations in Outline ........... . ............ 52

A. Motivation .52B. National Board of Revenue .52C. Auxiliary Organizations .53D. Field-Level Organizations .53E. Miscellaneous .53

II: THE NATIONAL BOARD OF REVENUE .53

1. Apex Level .532. Recommendations .543. The Directorate of Research and Statistics .55

Existing Functions .55

4. Recommendations .56

Structure .56Statistical Branch .56Research Branch .57Staffing .57

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5. Other Wings of the NBR: Recommendations ............... 57

III: AUXILIARY ORGANIZATIONS .. 58

1. Inspection, Training and Drawback ..................... 58

A. Cadre, Management, Personnel and Training Policy....58B. Directorate of Training ............... ........ 59C. Directorate of Inspection, Organization & Methods,

Audit, Manual & Publications Publications ... 60

D. Directorate of Drawbacks ........................... 61

2. Anti-Smuggling, Anti-Evasion and Valuation . . 62

A. Directorate of Customs Intelligenceand Investigation .................................. 62

B. Controller of Customs Valuation .................... 63

3. Recommendations ....................................... 65

A. Office of the Directorate-General .................. 66B. Customs Intelligence and Investigation .............. 66C. Valuation .......................................... 66D. Valuation Basis .................................... 67E. The Organization of the Controller

of Narcotics and Liquor ............. .............. 67

IV. FIELD-LEVEL ORGANIZATIONS ................................. 68

1. The Custom House, Chittagong .......................... 68

A. Basic Working Unit ................................. 69B. Custom House and Jetties ........................... 69C. Custom House .................................... 69D. Jetties .................................... 69E. Other Units .................................... 70

2. Valuation .................................... 703. Training ................................ ............. 704. The Custom House, Dhaka ............................... 715. Excise Collectorates .................................. 716. Collectorates of Appeal ............................... 727. Collectorates (Preventive and

Intelligence) ........................... .......... 72

V. PERSONNEL IMPLICATIONS ........ .............. . 73

VI. OTHER RECOMMENDATIONS .......................... .......... 74

1. Revenue Accounting .................................... 742. Computerization of Customs and Excise .75

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Page No.

Customs ............................................... 75Excise ................................................ 76Linking ............................................... 76Introduction and Phasing .............................. 76Training .............................................. 76

3. Customs and Excise Tariff Nomenclature ................ 77

VII. REVENUE IMPLICATIONS ...................................... 77

Appendix I: List of Tax Reports Received in ustoms and ExciseTax Branches of Research and Statistics Wing NationalBoard of Revenue ........... . ......................... 78

Appendix II: Proposed Strengthening and Re-organization of theDirectorate of Research and Statistics at NBR ......... 80

Appendix III: Proposed Separate Directorate of Training .............. 81

Appendix IV: Organizational Setup of Manuai Cell .................... 82

Appendix V: Proposed Directorate of Inspection, O&M, Audit,Manual & Publications ................................. 83

Appendix VI: Proposed Directorate of Drawbacks, Bonded Warehousesand Rebates ........................................... 84

Appendix VII: Revised Organization, Directorate of CustomsIntelligence and Investigation, Internal ResourceDivision, Ministry of Finance ......................... 85

Appendix VIII: Revised Organization, Office of the Controller ofCustoms Valuation, National Board of Revenue,Internal Resources Division, Ministry of Finance andPlanning .............................................. 86

Appendix IX: Directorate General of Revenue Intelligence,Investigation and Operations, Valuation, Narcoticsand Liquor ............................................. 87

Appendix X: Collectorate of Customs (Custom House), Chittagong ..... 88

Appendix XI: Dhaka Custom House, (National Board of Revenue)Internal Resources Division, Ministry of Finance andPlanning ............................................... 89

Appendix XII: Revised Organization, Collectorate of Customs andExcise, Chittagong .................................... 91

Appendix XIII: Collectorate of Customs and Excise, Dhaka ............. 92

Appendix XIV: Collectorate of Customs and Excise, Khulna (IncludingChalna Customs House, Khulna) ......................... 93

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Paneo.

Appendix XV: Revised Organization, Collectorate of Customs andExcise (Appeal) Chittagong, Internal ResourcesDivision (NBR), Ministry of Financeand Planning ........ 94

Appendix XVI: Collectorate of Customs and Excise (Appeal), Dhaka,Internal Resource Division, Ministry of Finance andPlanning ............ ................................. 95

Appendix XVIIA: Revenue Accounting: The Experience in India . 96

Appendix XVIIB: Procedure for Payment of Excise Duties Through PublicSector Banks in India . 98

CHAPTER 4: INDIRECT TAXATIOR: ESTIMATING REVENUE ANDINCIDENCE . 109

Socio-Economic Incidence . 111

Appendix 4.1: The Revenue Estimation Model ..... .................... 112Appendix 4.2: Technical Documentation of Model Data . 155Appendix 4.3: Analysis of Revenue and Incidence of Model Data . 156

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List of TablesPate No.

Table 2.1: Effective Rate of Import Duty and Sales Tax by MajorCommodity Group, 1985/1986 (Crores of Taka) ................ 2

Table 2.2: Effective Rate of Import Duty by Type of Use (Crores ofTaka).......................................................... 3

Table 2.3: Bangladesh: Statutory and Actual Customs Duty Rates...*.... 5

Table 2.4: Collection of Excise Duties by Commodity (Crore Taka) ...... 8

Table 2.5: Total Tax Element by Sector ................. 11

Table 2.6: The Rate Structure of VAT in Selected Countries ............ 19

Table 2.7: Growth of Indirect Tax Revenue in Selected Countries(Domestic Tax on Goods and Services as Percent of GDP) ..... 21

Table 2.8: Summary of Proposed Excise Tax Rate Changes ............... 30

Table 2.9: Revenue Effects of Excise Tax Changes (Millions of Taka) ... 32

Table 2.10: Distributional Impact of Excise Tax Changes on RealIncome (Percent)o............. o . * . ... 33

Table 2.11: Bangladesh Power Development Board Forecast RevenueFY87-FY92 (millions of taka) ............................. ... 36

Table 2.12: Revenue Forecast for Gas Subsector (Tk million) ............ 37

Appendix Effective Rate of Import Duty and Sales Tax by MajorTable 2.1: Commodity Group (i984/85 (Crore Taka).k a)............. ... 41

Appendix Effective Rate of Import Duty and Sales Tax by MajorTable 2.2: Commodity Group, 1983/84 (Crore T ak a ) 42

Appendix Effective Rate of Import Duty and Sales Tax by MajorTable 2.3: Commodity Group, 1982/83 (Crore Taka).k a).... 43

Table 3.1: Arrears of CDST, Excise and Income Taxes (millions ofTakaka) ... 49

Table 3.2: Seizures Classified by Customs and ExciseViolations............* ..... 64

Table 3.3: CDST Collections in Chittagong Custom Houseand in Total (millions of T ak a ) 68

Table 3.4: Collectorates of Customs and Excise (Appeals)Data on Disposition of Appeals............................. 72

Table 4.1: Effects of Changing Sectoral Excise Tax Rates...............157

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Chapter 2. NDIRECT TXATIOWN: POLICY

I. XRADE TAXATION

1. ImDwrts

2.1 Taxes on imports account for 50 percent of tax revenue inBangladesh. These comprise a number of elements: customs duties, whichare levied on c. and f. value, and the statutory rates of which range on anad valorem basis from 2.5 percent to 400 percent, sales taxes which areassessed on duty-paid value, development surcharge at a rate of 2 percent,license fees at a rate of 2.5 percent, and regulatory duty which rangesfrom 2.5 percent to 50 percent.

2.2 Approximately 65 percent of total imports are dutiable, three-quarters of which in 1985/86, are accounted for by machinery, petroleumproducts, iron and steel products, edible oils, chemicals, motor cars andother vehicles, milk, raw cotton and cement (see Table 2.1). Roughly halfof total CDST collections come from machinery, petroleum, oil andlubricants (POL) products, iron and steel products, chemicals and motorcars and other vehicles, i.e., principally from raw materials or capitalgoods. The value of imports, customs duties and sales taxes are shown inTable 2.1 for 1985/86 and in Appendix Tables 2.1 to 2.3 for the years1982/83 to 1984/85. There are no major fluctuations in the pattern ofimports, apart from sugar, which increased from an import of under Tk 10million in 1983/84, to Tk 1780 million in 1984/85, but dropped to Tk 900million in 1985/86. The increased import of sugar in these years also ledto a substantial increase in import duty collections.

2.3 Columns 4 and 5 of Table 2.1 and Appendix Tables 2.1 to 2.3calculate effective rates of duty for customs duties and sales taxes.These are actual collections divided by the base on which they are levied.Thus, for the important import items mentioned above, effectlve rates ofcustoms duty in 1985-86 ranged from 7 percent for POL products to 40percent for iron and steel products and motor cars and other vehicles.Effective rates of sales tax were less than 15 percent for those majoritems.1

2.4 Table 2.2 reports collections of customs duties and sales taxes(CDSTs) from imports broken down by type of use for the years 1982/83 to1984/85. It will be seen that while the breakdown among consumer goods,raw materials and capital goods in dutiable imports in 1985/86 is in theproportions 19 percent: 57 percent: 24 percent, the correspondingdecomposition in CDST collections is 20 percent: 57 percent: 23 percent.This yields effective rates of CDSTs of 40 percent, 40 percent and 38percent respectively and an average effective rate of CDST on dutiableimports of 39 percent.

1/ The effective rates of customs duty and sales tax on sugar were 96percent and 21 percent respectively.

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T^loA: Uffnctsv Rate ot Zpozt Duty and SalesT. by Mjor Cems'tty Gg@up

(Croso of Tska)

(1) (2) (3) (4) (5)

Import Custeme Sales (2).(1) (3) C(1)+(2)1

Value Duty TSx effective EffectiveItem Custas Seles

Duty Tax

1 Milk 60.47 7.35 0.02 9.1 0.0

2 Spie*s 13.96 8.17 1.57 58.4 7.1

3 Tallow LS.3 7.82 4.65 51.1 20.1

4 Edible Oils 170.73 75.95 2.2 44.5 0.9

5 Coconut Oil 37.79 8.78 9.29 23.2 19.9

5 Sugar 3.56 1.76 49.2 0.0

7 Bevragos 0.4 0.69 0.22 172.5 20.2

8 Uran ufactured Tobacco 0.92 0.05 5.4 0.0

9 Tobacco Products 5.32 10.52 0.06 197.7 n .410 Ceent - 106.56 6.81 l1.02 6.4 9.7

11 Coal 21.39 2.16 2.92 10.1 12.4

12 Coal Tar i..l 0.65 0.48 36.0 20.3

13 Pitch and Bitumen 0.63 0.44 0.19 69.8 17.8

14 Petroleum Products 392.92 23.71 0.1 6.0 0.0

15 Chmicals 106.61 36 18.78 33.8 13.2

16 Pharmaceuticals 26.17 4.31 0.12 16.5 0.4

17 Dyes, Colours. Paints. *tc. 31.05 17.24 9.66 55.5 20.0

l6 Photographic and Cinematographic 7.47 3.95 1.91 52.9 16.7

19 Pesticides 9.71 0.75 0.12 7.7 1.1

20 Pl"atic Materiuls 42.79 22.64 10.16 52.9 15.5

21 Rubber and Articlos 46.89 22.39 10.41 47.8 15.0

22 Pulp end Paper 20.04 22.51 7.1 112.3 16.7

23 Books and Journals 8.23 0.61 0.3 7.4 3.4

24 Man-Made Fibres and Yarn 69.51 31.23 4.4 44.9 4.4

25 Fabrics - Man-Mad. Fibres 9.91 14.92 4.34 150.6 17.5

26 Raw Cotton 71.62 8.07 0.1 11.3 0.1

27 Cotton Yarn 36.82 8.63 6.76 22.2 14.2

28 Cotton Fabrics 22.69 17.11 7.87 75.4 19.8

29 Second Rand Clothing 25.61 14.69 0.15 57.4 0.4

30 Cormic. Glcas and Glassware 16.85 7.55 2.64 44.8 10.8

31 Iron, Steel and Products 239.61 78.34 43.85 32.7 13.8

32 Metals other than Gold. etc. 56.9 13.28 7.57 22.5 10.5

33 Cutlery 18.86 12.83 4.96 66.0 15.7

34 Machbinry, Appliances and Parts 705.07 166.13 67.31 23.6 7.7

33 Railway and Parts 86.94 10.61 18.85 12.2 19.3

36 Mator Cars and other Vehicles 58.43 22.47 11.92 38.5 14.7

37 Aircraft and Parts 3.37 0.18 0.04 5.3 1.1

36 Ships. Boats etc. 65.65 9.02 0.26 13.7 0.3

39 Others 274.49 105.08 28.48 36.3 07.5

40 Development Surcharce 44.87

TOTAL 2917.19 650.27 300.78 29.1 8.0

Source: BEngladteh Fiscal Sta- sttics, Table 15.

1 crart - 10 million

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Table 22.: Zff.otlve l&t of Lpont Duty by Te ot Use

(Cxorae of Teka)

1) (2) (3) M*- 5

(4) - (1)

Iopet Custom _ .ls. (2) * 3) Z. *etive Rate

Value Duty Tax COST of CDmS (2)

1082183

Consuer Godas 434.15 171.67 40.46 212.15 48.47

Rl Mat rtals 1563.56 45S.43 161.92 617.35 39.48Capital Goods 919.46 223.17 98.36 321.53 34.97

TOTAL 2917.19 850.27 300.76 1151.05 39.46

1083184

Consu eo Goods 458.19 133.78 41.37 175.15 36.23Raw Matrtoala 1993.67 539.86 235.32 775.16 38.88

Capital Goods 790.50 245.10 81.59 326.69 41.33

TOTAL 3242.36 916.74 356.28 1277.02 39.39

1984183

Conauer Goods 855.11 290.33 81.49 371.82 43.48Raw Materials 2405.01 618.57 286.22 904.79 37.62Capital Goods 1165.10 260.35 87.61 353.96 30.38

TOTAL 4425.22 1175.25 455.32 1630.57 36.85

1985186

Consuner Goods 897.55 266.16 88.57 354.72 39.52

Raw Materials 2609.93 749.28 288.87 1038.15 39.78Capital Goods 1106.38 319.98 94.86 414.84 37.50

TOTAL 4613.86 1335.41 472.30 1807.71 39.18

Source: Bangladesh Fiscal Statistics. Table 2.1 and Appendix Tables 2.1 to 2.3.1 crote - 10 million

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2.5 Table 2.3 presents some information on the relationship betweenstatutory and effective rates of customs duties for the years 1979/80 to1981/82 for 21 (aggregated) chapters of the customs tariff.2 Althoughstatutory rates, defined as those enacted by statute, vary across groupsfrom 2 percent (for works of art -- a very minor item) to 150 percent (forhides and skins), the average rate weighted across groups is 42 percent.The effective duty rates vary just as much and indeed there is a strongcorrelation between them. The average effective customs duty rate iehowever significantly lower at 24 percent in all three years. Differencesbetween statutory and effective rates could arise from exemptions fromduties granted as a result of various agreements, exercise of discretion bycustoms officers, nontariff considerations outlined below, extra-legalreasons and problems of measurement and errors in the data.

2. Ouantitative Restrictions

2.6 Parallel to the system of using tariffs to collect revenue andprotect domestic industry, Bangladesh has also relied on quantitativerestrictions to control international trade. Such controls were introducedby the British T-dian Government during the Second World War, and havecontinued in the countries of the subcontinent after 1947.

2.7 In 1985, the government moved from a system in which imports weresubject to restrictions, unless otherwise specified, to a system of anegative list of banned imports. The list covers 27 percent of allcategories of products listed in the tariff code, using a four digitcommodity classification.3 Not all those bans are effective. Theinability to police long borders and Bangladesh's riverine terrain createconsiderable incentives for smuggling. This negates the protection whichbans were intended to provide without raising revenue. The example offabrics is significant here: the reduction of the combined CDST rate from200 to 100 percent in the FY87 budget increased revenue by Tk 30 crore.

2.8 The restricted list consists of three components. The firstcomponent lists the banned items that are importable by establishedexporters and foreign exchange-earning hotels. The second component listsitems that require prior permission for import. These include seeds,insecticidea, chemicals for explosives, drugs and chemicals for drugs andsimilar items. The third component lists items that are only importable byregistered industrial enterprises, up to the values specified in their

2/ The Bangladesh Customs Tariff Classification (referred to as the BCTCode) follows the definition and coding scheme laid down in theBrussels Tariff Nomenclature. It has 99 chapters arranged into 21sections, with each chapter containing the definition of and thestatutory duty rates for the commodities in that chapter. These aredefined and set out in the Bangladesh Customs. Excise and Sales TaxTariff, National Board of Revenue, Ministry of Finance and Planning,GOB, Dhaka, Third Edition (Corrected up to April 10, 1983) and TheCustoms Act. 1969, (Act IV of 1969), (As modified up to December 31,1984), Ministry of Law and Justice, GOB, Dhaka, 1985.

3/ The Bangladesh Tariff Code lists a total of 1192 product categories atthe four-digit level of classification.

ITblaL: Bang2ladesh: Statutory and Actual Cuatoms Duty Rates

Section Stac tory Iffeetive Duty

Number Description D,ty 1079t80 L980181 1981/82

(In percentage)

1. Live animal and animal products 18 4*3 4.4 7.7

2. Vegetable products 8 11.1 16.5 4.6

3. oils and fats 42 25.5 20.5 28.3

4. Prepared foodstuffs 53 27.6 18.5 13.2

5. Hineral products 10 9.8 9.4 7.9

6. Chemical products 36 17.8 i6 17.3

7. Plastics. rubber 106 58.3 63.6 66.9

8. Raw Hides and skins 150 65 51.9 61.5

9. Wood, cork. straw 121 31.4 20.8 29.9

10. Paper and paperboard 88 38.9 54.7 56.6

11. Textiles 47 34.9 34.2 36.3

12. Footwear 85 26.2 47.7 73.8

13. Stone, plaster, cement 101 41.2 49.6 50.3

14. Jewelry 100 97 na. 92.1

15. Base metal articles 44 32.3 27.6 30.8

16. Machinery 73 25.3 28.9 30.6

17. Transport equipment 52 24.2 20.2 25.4

le. Optical & photographic goods 61 40.8 38.4 50.4

19. Azs and emunition 125 104.2 149.5 114.9

20. Misc, manufactures 98 54.8 51.7 41

21. Works of art 2 40 42.9 2.3

Total Duty Rate: 42 24.2 23.7 23.7

Refund C) 0.1 0.1 0.1

Sales Tax C,) 10.9 10.9 10.5

Total not duty + sales tax rate 35 34.5 34.4

Note: The data on statutory duties were obtained from the National Board of Revenue. (NR) andwere matched to the chapters identified in Bansladesh Customs. Exciso and Salcr Tax Tariff(op. cit). The data on import duties and sales tax" wero also from the NBR and matchedthe figures recorded in the budgets for these years closoly. Due to the exclusion of suchitems as food-aid imports, the data on total imports given by the Bangladesh Bureau ofStatistics (BBS) and used by the NiR differ from the data supplied by the Bangladesh Bank.(BB) and usod by the Planning Comission to derive the budget estimates. The computedactual duty rates are however, similar rogardless of which source is used to got totaLiMport stimates. In order to aggregate items in conformity with the chapter and sectionsin the :ustoms Tariff and relate them to the actual duties collected for each specificcoefodily by the Customs . the statutory duty for each commodity was weighted by the importshare of that comodity. The actuol imports for 1981/82 were used to derive thoseweights.

Source: J. J.Stern. S. Alm and A. QueyU. "Nominal and Effective Duty Rates'. TIP Studies.Dhakoa Revised Draft. August 14. 1985.

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passbooks. Rougbly 20 percent of all categories of products at the four-digit Standard Industrial Trade Classification (SITC) level are on therestricted list.

2.9 Commodities that are not on either the negative or restrictedlists can be imported either under the official exchange rate or the WageEarners' Scheme (WES) market. The Import Policy Order specifies whatcategory of products or importers have access to imports at the officialexchange rate. Host of the official foreign exchange is reserved for theuse of government entities and corporations to ensure that "essential"government needs are met first. The residual is available for privateimporters. Currently about 46 percent of the non-aid imports come inthrough the WES market which carried a 15 percent premium over the officialrate in FY86, and around 7 percent in FY87.

2.10 Three features of the regime of quantitative restrictions may benoted. First, the extensive nature of bans makes many of the tariffsredundant. There are many commodities that are on the negative list butwhich at the same time have a tariff declared against them. Second, thereis no evidence that once an industry has been in production for some years,it is subject to pressures to become more competitive or that any bans havebeen lifted for this purpose. Products for which this seems to be the caseinclude plastic sheeting, foam rubber products, rubber sheeting and beltsof specific sizes, unginned cotton, sheet and plate glass, cast iron platesand M.S. bars and rods, stapler and hair pins, turbine pumps and aircoolers, dry cell batteries, steel balls, flashlights, single phaseelectric meters, cheap toothbrushes and razor blades, band saws and cottonginning machines. Third, although bans seem extensive, many of the banneditems are openly available in the market, since they come in via smuggling(M.S. billets for example) or are freely importable under donor-aidedprojects (diesel engines for example). This implies that the premiumcommanded by such items accrues to smugglers or, in the case of therestricted list, to licensed importers rather than in the form of revenueto the government. Preliminary estimates suggest that the average scarcitypremium is of the order of 35 percent; however, this conceals verysubstantial variation as there are items where the premium is as high as100 percent.4

3. Izports

2.11 Bangladesh's principal exports are composed of traditional itemssuch as jute and jute goods; tea, hides, skins and leather; fish andhandicrafts. Since 1982/83, export duties have been collected largely onhides, skins and leather goods and now apply only to wet blue leather;5

these account for just over 1 percent of revenue from trade taxes. Non-tradltional exports are roughly 20 percent of total exports and includeready made garments, prawns, shrimps and froglegs.

4/ Cf. A. Bhuiyan, et. al, Domestic Prices of ImRorts in Bangladesh: AReanpraisal of Trade Margins under Exchange Control (Dhaka University,1985).

5/ However, ln as much as jute exports go through the official foreignexchange market, they are subject to an implicit export tax equal tothe premium in tVe WES market.

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II. DOMESTIC INDIRECT TAXATION

1. Excise Taxation

2.12 Over 97 percent of taxes on domestic production comes from excisetaxes which are levied ex factor on domestic production and also on someservices. (see Table 1.4). The domestic sales tax, which also used toapply at the manufacturing stage, was amalgamated with the excise tax toform a single tax at the ex-factory level. Given the heavy reliance ontrade taxes, there has been an attempt to raise additional revenue from thedomestic sector in recent years. In recent years excise taxes haveaccounted for 23 percent of tax revenue. Most domestic production isexcisable, with the exception of cottage industries which are units thathave invested not more than 0.1 million taka in machinery and do not employmore than 15 people. However, the base of domestic indirect taxation isconstrained by the narrowness of the formal industrial sector. The shareof the urban informal sector in urban value added is around 40 percent. AsTable 2.4 makes clear, two-thirds of excise tax revenue is accounted for bythree categories of goods, viz., tobacco, gas and POL products, whereasnearly three-quarters comes from eight categories of products, viz., suesr,cement, jute manufactures, narcotics and liquor and paper, in addition tothe three mentioned above. Excise taxes are assessed on different items oneither a specific or ad valorem basis; the latter range from 5 percent to200 percent, with a maximum of 25 percent on many items.6 The averagerate of excise taxation, defined as the ratio of collections to the grossvalue of excisable production is around 8 percent.7

2.13 Other domestic taxes are those levied on domestic services andinclude the advertisement tax, electricity duty and motor vehicle tax;however, these raised less than 3 percent of total revenue from domesticproduction (see Table 1.4).

Pres2mDtive Taxation

2.14 The government has also attempted to impose taxes on a presumptivebasis. The business turnover tax (BTT), which is levied at 2 percent,covers various services such as automobile workshops, printing presses andtravel agents and goods not produced in large scale manufacturingestablishments. While a number of such establishments have the potentialof yielding more revenue, the mission was informed that considerabledifficulties have been experienced on the collection side. Revenue fromthe BTT was only Tk 2.5 million in 1984-85.

6/ A flood relief surcharge amounting to 10 percent of excise duty payableoni narcotics, liquor and cigarettes and 5 percent of excise dutypayable on cinemas, hotels, restaurants and beverages was introduced inSeptember 1987 and remains in effect till June 30, 1988.

7/ This is an estimate arrived at by the mission using production figuresfor 35 sectors, estimates of the share of excisable production for eachand applying a correction for the share of cottage industries bysector.

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Tabl 2.4: Collection at oecise Duties by Caoidity

(Crore Taka)

Item. 1962/63 1983184 1984/85 1985/86

1 Tobacco Products 239.39 246.36 309.16 352.96

2 Natural Gas 63.02 116.63 133.6

3 P1L 27,17 32.45 33.66 154.61

4 Te& 3.12 3.07 3.54 3.99

7 Beverages other than Wine 1.05 1.28 1.69 2.35

8 Glucose, Dextrose. etc. 0.52 0.74 0.83 1.15

9 Sugar 25.93 32.22 5.32 14.26

10 Biscuit and Dread 4.33 3.98 4.41 4.43

11 Cement 9.65 8.4 7.54 5.58

12 Paints and Varnish 2.69 3.26 3.99 4.05

13 Comestics 2.36 2.67 3.33 4.64

14 Soaps and Detersents 4.89 5.83 10.15 10.38

1S Matches 3.15 3.46 3.89 6.51

16 Plastic Products 1.68 1.99 1.22 1.55

17 Rubber Products 0.59 0.31 0.22 0.23

20 Paper 6.92 8.28 6.52 10.56

21 Paper Board 2.66 4.55 4.89 4.66

22 Bank Cheque 0.51 0.38 0.71 0.79

23 Cotton Yarn 7.01 7.09 5.37 6.7

24 Cotton Fabrics 0.59 2.3 2.35 2.45

25 Man-Made Fibres and Yarnand Fabrics 0.34 0.59 L.4

27 Jute Manufactures 12.82 14.88 25.5 15.42

28 Woollen Yarn 0.27 0.2 0.27 0.19

29 Woollen Fabrics 0.08 0.19 0.34 0.21

30 Glass and Glassware 2.8 3.19 2.85 2.43

31 Metal Container 0.71 1.19 1.15 0.88

32 Mild Steel Products 6.31 8.68 12.47 11.68

33 Electric Batteries 2.76 3.59 5.08 6.07

34 Electric Bulbs and Tubos 1.22 1.56 1.97 2.24

35 Electric Fans and Parts 1.4 1.72 2.36 2.75

36 Ceramics 1.55 2 3.51 6.4

37 Wire. and Cables 5.01 5.82 8.72 6.62

39 Hotsel and Restaurants 4.77 5.6 8.12 10.05

40 Gold and Silver Products 0.43 0.42 0.45 0.46

41 Cinema and Entertainment 17.94 13.44 12.88 17.06

42 Packaging Materials 1.22 1.43 1.57 1.74

43 Bricks 1.04 0.91 1.04 1.43

44 Motor Garaze 0.0146 Boot Polish 0.01

47 Radio 3.56 4.3 5.81 8.34

48 Mechanized Vehicles 1.8 3.65 4.79 6.68

49 Shoes 1.72 1.96 2.33 3.07

50 Steel Furniture 0.12 0.01

(Table continued on next page)

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Zakjt&I-4 (Continued): Collection ot Zacste Duties by Cemoditv(Crore take)

Itms 1982183 1963/64 1964165 1985166

52 Wooden Furniture 0.52 0.76 1O07

53 Starch 0.01 0.01

54 medicine *md pediicial Products 0.09 9.84 13.30 33.6255 Antte ptic. Pesticide, etc. 0.34 0.27 0.29 0.7356 Welding Zlectrodee 1.06 1.5 2.29 2.76

57 Steel agot 0.05

58 Stainles Steel Including Cutlery 0.06 0.01 0.04

So Steel Pipe nd 0.1. Pipe 4.21 6.01 3.26 4.66

60 Steel Billet 0.09

61 Oxysan. Carbon Oxide. etc. 1.2 L82 2.66 3.63

62 Sodium Silicate 0.47 0.55 0.53 0.66

63 Glycerine 0.51 0.47 0.66 0.79

64 Asbestos. Cement 0.15

65 Telephone and Telprinter Service 1.1* 6

66 Plastic Bag 0.3 0.55

67 Insulation Board 0. 0.14

88 Nuts, Bolts, Screws 0.14 0.1

69 Electric Goods and Fittings 0.06 0.1

70 Cinematographic Film 0.57 0.75

71 Sanitary Ware and Glazed Tiles 0.68 0.98

72 Liquor and Narcotics 13.77 15.1.4 1N.62 16.38

73 Fiscellaneouse 0.47 0.53 0.32 0.24

TOTAL 497.62 597.54 691.92 770.95

Source: Bangladesh Fiscal Statistice, Table 21.

1 crore - 10 million

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III. FEATURES OF INDIRECT TAXATION

1. Intermediate Goods Taxation

2.15 As in other South Asian countries, the indirect tax system inBangladesh relies quite significantly on the taxation of intermediate goodsand raw materials. Quantitative estimates will be provided below. Suchtaxation has two consequences. First, in the absence of well-functioningsystems of CDST and excise relief of inputs going into exports (a subjectdiscussed in detail later in the chapter), the system discriminates againstall exports, and particularly against the development of a nontraditionalexport sector. This is because the duty-drawbacks currently available toexporters apply principally to imports directly used by the exporter in theproduction process. While these have helped realize the foreign exchangeearning potential of non-traditional exports, as in the case of thegarments sector, the partial provisions prevent successful establishmentof industries drawing more extensively on domestic inputs, and hencedeveloping backward linkages with the rest of the economy. Second, th.cascading effects of taxes on inputs, of taxes on inputs into those inputs,and so on make it difficult to ascertain how much different goods are taxedand can lead to consequences different from those intended by policymakers.Thus, taxation via inputs can discourage sectors which government policywas originally formulated to encourage. It can for the saziu reasonfrustrate the objective of protecting certain sectors of the economy.

2.16 The cascading effect of input taxation on the domestic economy isshown in Table 2.5 which reports the total tax effects of excises and CDSTson domestic production. The numbers are underestimates since the absenceof capital stock data implies that the tax element accruing from thetaxation of capital stocks is not included. The calculations use a 35sector input-output table updated to 1984/85.

2.17 Table 2.5 reports the total tax element in the price as well asthe constituent elements arising on account of excise taxation and CDSTs ofinputs, of inputs into those inputs, and so on.8 The total tax is thesum of both elements. While the effective tax (column 4) is the revenueaccruing to the government as a result of a unit increase in gross outputof a sector, the total tax (column 3) is the revenue accruing to thegovernment as a result of a unit increase in final demand of the sector,i.e., net of interindustrial demands. Since the effective tax is levied ongross output while the total tax is levied on final demand, a figure whichis smaller than gross output, the total tax rate is higher than theeffective tax rate. The extent of taxation arising through cascadingeffects is shown by TDIFF, which is the difference between the total taxelement and effective tax. An alternative representation is INTAX, whichexpresses TDIFF as a proportion of the total tax element. Thus a value ofINTAX of 1 indicates that the sector was not taxed directly, so that thetax element for the sector is due entirely to the cascading effects ofinput taxation; while an INTAX equal to 0 shows that the sector is notaffected by the indirect effects of taxation and that the tax element is

8/ An explanation of the method used appears in Appendix 2.1 of thischapter.

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U&IL.LI: Total Tag Zl_ t by Sector

(1) (2) (3)ws()*(3) (4) (5U3()(6)in(5)+(3) Etfectiv* CDSTTotal CUsT Total Emetis total Tax Effective Taz 10W siPTAx Final mpacts

1 RICO 0.17 0.26 0.43 0.00 0.43 1.00 0.002 Wheat 0.27 0.99 1.20 0.00 1.26 1.00 0.003 Jute 0.07 0.12 0.19 0.00 1.19 1.00 0.00

( Cotton 7.05 0.06 7.11 6.72 0.39 0.05 0.00

5 Too 1.01 3.32 4.33 2.46 1.67 0.43 0 00

a Other Crops 0.31 0.15 0.46 0.21 0.24 0.53 8.987 Livestock 0.14 0.29 0.42 0.00 0.42 1.00 0 000 Fieheriee 0.26 0.28 0.55 0.00 0.55 1.00 0 009 Forestry 0.04 0.05 0.09 0.00 0.09 1.00 0 00

10 Suser 3.41 1.24 4.65 4.19 0.46 0.10 29 SO

11 Edible 0Q1 1.43 0.44 1.87 0.99 0.89 0.47 12 2'

12 Tobacco Products 0.40 42.73 43.13 42.56 0.57 0 01 0 z013 Other Food 0.55 3.17 3.73 3.09 0.64 0.17 2 64

14 Cotton Yarn 16.05 2.39 18.45 14.53 3.92 0.21 0 00

15 Cloth 5.78 1.41 7.20 0.39 6.81 0.94 6.77

16 Jute Textile 0.19 3.05 3.24 2.25 0.98 0 30 * C0

17 Paper 10.07 6.61 16.68 1.94 3.74 0.22 7 84

18 Loather 0.74 0 55 1.29 0.00 1.29 1.00 0 :;

19 Fortiliser 0.28 1.04 1.32 0.04 1.28 0.97 a 00

20 Pharmaceutical end chbeiccl 6.25 1.61 7.85 6.61 1.24 0.16 15 81

21 C*eMnt 10.94 3.97 14.91 12.31 2.60 0.17 c 00

22 Basic Metals 25.41 0.19 25.60 20.91 x.69 0.18 0 00

23 M*tal Products 5.95 2.14 8.08 4.61 3.27 0.40 74 3524 Wood and Other imdustries 7.07 3.92 10.98 8.28 2.70 0.25 *1 '9

25 Urban Eousebuilding 6.23 1.24 7.47 0.00 7.47 1.00 0 0

26 Rural Bouse Building 2.18 0.42 2.60 0.00 2.60 1.00 0 0027 Other Construction 8.82 1.18 10.00 0.00 10.00 1.00 0 3028 Petroleum 2.88 3.71 6.59 1.19 5.39 0.82 0 *9

29 Electricity and Gas 1.34 L9.22 20.56 15.60 4 97 0.24 0 00

30 Transport Service 0.3z 0 40 0.72 0.05 0.67 0.93 C 30

31 sousimg 0.24 0.06 0.29 0.00 0.29 1.00 0 ^0

32 Realth 1.41 0.41 1.82 0.00 1 82 1.00 0 00

33 Education 0.29 0.18 0.47 0.00 0 47 1.00 0 30

34 Public Administration 0.67 0.34 1.01 0.00 1 01 1.00 0 00

35 Trade and Other Servtces 0.18 0.41 0.60 0.26 0.34 0.5' 0 00

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equivalent to the effective tax. It will be observed that INTAX in severalcases is 1, close to one in three cases and over 50 percent in 15 cases.INTAX is very low in a sector such as tobacco which has a high tax onoutput.

2.18 These estimates also reveal that while TDIFF is generally smallerin magnitude than calculated for India, those for cotton yarn (0.21), sugar(0.10) and basic metals (0.18) are higher than the corresponding values forIndia (0.08, 0.04, and 0.10 - 0.15). The total tax on large-scale tobaccoproducts in Pakistan is in excess of 75 percent while that on tobaccoproducts in Bangladesh is roughly 50 percent; the corresponding TDIFFs are0.05 and 0.01 respectively.9

2.19 The calculations confirm the cascading effects of input taxationin Bangladesh. These effects are likely to have important influences onthe pattern of production and exports and underline the need to devisestrategies to avoid input taxation, except for those sectirs where theoutput is particularly difficult to tax. But, even in the latter case, theconsequences of taxing inputs into other sectors need to be calculated andevaluated.

2. Protection

2.20 The information on domestic and trade taxation presented inprevious sections reveals that substantial protection is provided tosignificant portions of domestic industry. First, while the averageeffective rate of CDST is around 39 percent (see paragraph 2.4), theaverage effective rate of excise taxation is around 8 percent (seeparagraph 2.12). A more disaggregated treatment shows that significantdifferentials between CDSTs and excises exist for such items as cotton,pharmaceuticals and chemicals, cement and basic metals. Second, andcomplementarily, a comparison of the total tax element in domesticproduction occurring via intermediate goods taxation (column 4 of Table2.5) with the effective rate of CDST on imports (column 7 of Table 2.5)shows that the latter is higher for sectors such as sugar, edible oils,pharmaceuticals and chemicals. The conclusion is substantiallystrengthened when account is taken of quantitative restrictions on importswhich are important for major domestic industries such as textiles, steeland engineering.

9/ Estimates for India and Pakistan are reported in E. Ahmad and N. Stern,"Alternative Sources of Government Revenue: illustrations from Indiafor 1979/80", pp. 281-332 in D.M.G. Newbery and N. H. Stern (eds.), MiMTheory of Taxation for Developing Countries, (Oxford University Pressfor the World Bank 1987) and "Tax Reform for Pakistan: Overview andEffective Taxes for 1975/76", Pakistan Development Review, 1986, pp.43-72.

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IV. REFORMING INDIRECT TAXES

1. Need for Reform

2.21 The structure of indirect taxation described above has thefollowing implications. First, the "tax handle" provided by imports servesthe twin functions of generating a large proportion of revenue and, asshown above, of conferring protection to domestic industry. Table 1.2showed that this is not uncharacteristic of countries at the stage ofdevelopment at which Bangladesh finds itself. However, as was shown byTable 1.6 on tax elasticities, import-based taxation typically does notlead to an elastic system of taxation, i.e., one where tax revenue expandsin line with GDP, without the need for frequent discretionary changes intax rates. Second, the existing system relies heavily on taxation ofintermediate goods with, as argued above, deleterious consequences onexports and efficiency. Both elasticity and efficiency objectives canultimately be accomplished by moving towards the taxation of consumption.This chapter therefore recommends that Bangladesh move towards aconsumption-based tax system and broadly outlines the steps necessary toachieve that goal.

2.22 Moves towards broad-based consumption taxation are limited bythree factors: (1) the desire to protect domestic industry; (2)narrowness of the formal sector industrial base; and (3) weaknesses in taxadministration. These concerns are addressed below.

2.23 The progressive replacement of trade-based taxes by domesticindirect taxation will, other things being equal, have the effect ofreducing protection to a wide range of import substituting industries.However the government, in line with the objectives of the New IndustrialPolicy of 1982, has begun to reduce and streamline protection afforded todomestic industry. Thus, for example, the tariff code had twenty-fourdifferent statutory rates until 1985/86. Furthermore, imports were alsosubject to sales taxes at different rates. In that year, the governmentrecategorized about 700 importable items under 11 tariff rates. Of these11 rates, five are for the majority of raw materials (rates of 0-20percent), one for intermediate products (50 percent rate) and one for finalproducts (100 percent rate). In addition, four higher rates were declaredon final goods deemed to be luxuries: 150 percent for items such as musiccenters and washing machines, 200 percent for made-up textiles, perfumesand precious stones, 300 percent for cars and ready-made garments and 400percent for cigarettes. Furthermore, the government has decided as part ofthe IDA-supported Industrial Sector Credit to take the following policymeasures within the next one to three years. First, the overall number ofcustoms duty rates will be reduced to eight: 0 percent, 2.5 percent, 5percent, 10 percent and 20 percent for raw material and capital goodsimports; 50 percent and 75 percent for intermediate products, and 75percent and 100 percent for final products. Second, sales taxes will belimited to only two rates, 0 percent and 20 percent. Third, duties on abroad range of luxury items will be lowered to a maximum of 100 percent.Fourth, the restricted list will be eliminated for industrial imports andall industrial imports will also be importable by commercial importers.Fifth, the negative list will be progressively reduced, with priority givento removal and eventual elimination of items related to the textiles andsteel and engineering sectors which together account for roughly 30 percentof value added in manufacturing. Finally, tariffs in those two sectors

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will be restricted to yield import duties no higher than 85 percent. Theprocess of future tariff rationalization in other sectors of the economywill be the subject of further dialogue between IDA and GOB.

2.24 A number of the reductions in the textiles and steel tariffssimply recognize what is already the case, viz., that compliance-reducingactivities in a country with semi-porous borders and limited administrativecapacity make high statutory rates irrelevant. To that extent, a closeralignment of statutory with effective rates, by encouraging imports throughofficial channels will increase revenue and increase protection toactivities such as cotton weaving which have been adversely affected bysmuggled fabrics. Nevertheless, in as much as 81 percent of importsconsist of raw materials and capital goods which have an effective CDSTrate of 39 percent, (see Table 2.5) the broad thrust of the proposals wouldreduce protection and partly offset the discrimination against exports:thus, deleterious effects of high tariffs on steel imports on the emergenceof an export-oriented engineering sector offer an important example of theneed for policy reform. Furthermore, such policies reduce reliance onCDSTs as a source of revenue: their desirability is highlighted by theexperience of FY86/87 when a fall in imports by roughly 20 percent madepublic revenue hostage to the balance of payments situation, invitingpressures to make upward adjustments in rates that are not consistent withlonger-term development objectives. For these reasons, the mission has notsuggested any increases in trade taxation. Furthermore, it has left thequestion of appropriate rate reductions in the light of the circumstancesof individual subsectors to be pursued in the context of IDA's continuingdialogue with GOB on industrial policy.

2.25 The "tax handle" theory of import-based taxation however suggeststhat the process of tariff reduction, though desirable for the reasonsoutlined above, could be aborted if it led to revenue losses not offset byalternative sources of taxation. The framework developed in Chapter 4below has been used by the mission to estimate that the proposed reductionand streamlining of CDSTs in the textiles, steel and engineering sectorswould lead to a revenue loss amounting to at most 1.5 percent of annual taxrevenue. Against this must be set the fact that the importation, undersuitably set customs duties, of items currently on the negative andrestricted import lists, and, as mentioned before, enjoying substantialscarcity premia, could generate substantial amounts of revenue. Thus therecan be no presumption that the Industrial Sector Credit proposals arenecessarily revenue-reducing.

2.26 However, to ensure that moves towards tariff rationalization inthe future do not lose momentum, it is important that these and otherrevenue losses, for example, those occurring from the progressive extensionof duty drawback and input duty crediting schemes, be made up throughdomestic taxation. The base of domestic excise taxation is constrained, asmentioned before, by the narrowness of the formal industrial sector. Overthe long-term therefore, the rate at which domestic revenue grows will bedetermined by the pace of industrialization. However, it is the mission'sjudgment that significant revenue gains are possible even with anintensification of existing excises without adverse implications forequity. These proposals are developed in detail in Section VI below.

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2.27 Finally, the revenue potential of the existing tax system could beexploited to a much greater extent by improvements in the administration ofindirect taxes. Specific recommendations covering this entire area areprovided in Chapter 3.

2. A Desirable Tax Structure

2.28 Two examples of systems that attempt to tax final consumption area single-stage sales tax or a value-added tax at the retail level. Suchsystems therefore constitute the ultimate goal to which policy reformshould be directed. However, such broad-based taxation at the retail levelis not in prospect in Bangladesh in the near future. The missionaccordingly recommends that existing tax instruments be strengthened andmodified in order to phase in a rudimentarv value-added tax (VAT) at themanufacturing-cum-import stage over a three-year period, with concomitantmoves towards introduction of retail stage taxation for selectedcommodities. The rud'mentary nature of the VAT derives from the fact thatit would, at the time of introduction, apply to the organized sector of theeconomy, viz., international trade, the public sector and those industrieswhere administrative capacity permits effective imposition and collectionof taxes. This recommendation is conditioned by three features of thecurrent system. First, the lack of a retail level tax arising from thesmallness of outlets and poor record-keeping limit the depth of the taxsystem. Second, the narrow range of formal sector domestic productionconstrains its horizental coverage. Third, administrative experience withduty drawback and crediting procedures is quite limited.

2.29 Value added is the difference between the value of a firm's salesand the value of purchased inputs used in producing the goods sold. It isthus equivalent to the wage and salary bill, interest payments and grossprofits of the firm. In general, a firm adds VAT at a given percentagerate to its sales and deducts certified payments of VAT on its purchasesbefore paying the net amount to the authorities. The tax is thus designedto avoid the taxation of inputs, so that the base of taxation is finalgoods -- consumers cannot reclaim VAT which they pay. In practice thereare different variants of the VAT. The following sections elaborate on thekind of tax it would be suitable to introduce, the reasons underlying therecommendations and the administrative arrangements which must accompanyit. An illustration of the VAT appears in Appendix 2.2 to this chapter.

2.30 The manufacturing-cum-import stage VAT recommended by the missionis intended eventually to provide the principal source of indirect taxrevenue in Bangladesh. It would replace the present system of excisetaxation as far as domestic production is concerned. Thus, producersregistered for excise tax would automatically be registered for the VAT.Turning to import taxation, the sales tax on imports and customs duties ona range of items for which there is no domestic production would bereplaced by the VAT, a theme elaborated in the next paragraph. The systemwould have the following characteristics. A manufacturer's excise taxliability would be reduced by value added taxes already paid on purchasesof raw materials and capital goods. Such a VAT, which includes taxpayments on capital goods as well as on raw materials, is said to be of the

16 -

consumntion type. 10 The manufacturer in the above example would be"credited" for tax payments already made on inputs and would therefore sendthe tax authorities the excess of the tax liability on outputs over that onintermediate inputs. This is a VAT utilizing the credit system in itsimplementation; its administrative advantages over other methods ofcalculating tax liability are discussed below. Finally, the base fortaxation would be value added, at home or abroad, of goods that have astheir final destination consumers in Bangladesh. This would tax finalimports and exempt exports. Such a VAT is said to embody the destinationgrinciple and is permissible under GATT rules.

2.31 The value added tax outlined above would not replace all indirecttaxes. The importance of customs duties in revenue has already been notedin Chapter 1. It is therefore suggested that the revenue function of thecustoms duty be gradually taken over by the VAT, reserving for the former arole that is primarily protective in intent.11 This implies inter alia,that customs duties on a broad range of items for which there is nodomestic production and which are therefore primarily revenue-raisingwould, in addition to excise taxes and sales taxes be absorbed within theVAT. It would be important to ensure that the VAT raised as much revenueas the duties and taxes initially replaced by it and, therefore, that itsrate be set on that basis. International experience with rate structureand revenue growth from the value added tax is presented below.

2.32 Protective customs duties on imports, by not being part of theVAT, would provide an (implicit) subsidy to domestic producers of suchgoods. Furthermore, since customs duties raise the user prices of thegoods on which they are levied, the implicit subsidy in question would befinanced by taxing its users. The rationale for such subsidies is providedby the argument that they are required to make certain import-substitutingsectors of the economy ultimately competitive with foreign producers. Asmentioned above, IDA, in its dialogue with GOB on industrial policy, isattempting to identify sectors where such arguments are persuasive andwhere subsidization through tariff protection should therefore be extendedon a time bound basis. Efficiency would require making such subsidiesexplicit rather than implicit, as is the case with protective customsduties. It is recognized however that administrative capacity and otherdifficulties constrain the extension of explicit subsidies in all but a fewsectors such as steel where the dominance of a large public sector plant(e.g., Chittagong Steel Mills) makes it easier to protect via explicitsubsidies. This implies that customs duties not creditable under the VATwill be required for purposes of protection. As noted before, protectivecustoms duties, in contrast with explicit subsidies, are a source ofrevenue, a consideration that will, however, assume progressively lessimportance with the growth of domestic production, the revenue elasticityof a VAT and the mission's proposals for raising additional revenue in the

10/ VAT systems which disallow credit fo. taxes paid on capital goods --the so-called "income-type" VATs -- are generally not used. Exceptionsamong LDCs are Argentina and Peru and, to some extent, Turkey andMorocco.

11/ It is recognized that this would make a positive contribution torevenue as well.

- 17 -

short run presented in Section VI below. The proposed separation ofcustoms duties into those that are primarily revenue-raising and the restand the inclusion of the revenue-raising component into the VAT would,however, have the advantage of weakening the links between industrialpolicy, of which protection is an element, and tax policy, and thus allowdiscussions on promoting efficient industrialization to be conducted moreindependently of overall revenue concerns.

2.33 The value added tax may be supplemented by excises on selectedluxury items: these should apply at the same rate to domestic productionand imports of those items. With protective customs duties outside thepurview of the VAT, the reformed system of indirect taxation on importswould be characterized by (i) a va'Lue added tax at a standard rate, (ii)supplementary excises on imports of selected luxuries and (iii) primarilyprotective customs duties in certain sectors. Correspondingly, fordomestic production, there would be (i) a value added tax at a standardrate and (ii) supplementary excises on domestic production of the sameluxuries. As mentioned before, items (i) and (ii) would have matching ratestructures.

2.34 It will be recognized that a VAT at the manufacturing-cum-importstage applying to the organized sector does no*: tax final consumption.Thus, sectors not registered for tax purposes, viz., small scale andunorganized manufacturing, much of wholesale and retail trade andagriculture will not be credited for taxes paid on their inputs, a featurethat usually encourages registration by progressively more taxpayers underthe VAT, thus adding to revenue growth. Hence the rudimentary VAT andconcomitant changes in administration are to be seen as intermediate stepstowards the evolution of a retail-based tax system.

2.35 These recommendations have three features. First, they wouldoffset some of the problems identified by the preceding analysis of thecurrent system. Second, they build on existing administrative instrumentssuch as duty drawback and excise tax relief procedures, a number of whichalready possess the characteristics of an embryonic VAT at themanufacturer-cum-import stage. Third, they embody the lessons ofinternational comparative experience with reform of indirect taxes. Suchexperience suggests inter alia, that a three-year horizon for theintroduction of a rudimentary VAT is feasible for governments committed totax reform. That timeframe is also broadly consistent with that for theongoing reform of tariffs and quantitative restrictions.

3. Comnarative Experience with the VAT

2.36 Substantial comparative experience is available with the valueadded tax. That experience is valuable in describing what variants of thetax would be most suited to the circumstances of Bangladesh and ispresented in that spirit. Nearly sixty countries, forty developingcountries among them, use some form of VAT. Of these, thirty ninecountries, mostly in the European Community (EC) and Latin America use thecomprehensive form of the tax, i. e., one that extends through the retaillevel.12 By 1986, about half the LDCs employing the VAT had adopted the

12/ Non-Latin American developing countries that use a comprehensive VATinclude Madagascar, Niger, Korea, Taiwan (China), and Israel.

- 18 -

comprehensive form: these were principally the middle and upper-middleincome developing countries.

2.37 Turning to low- and lower-middle-income developing countries, sometwenty countries in sub-Saharan Africa as well as Indonesia use the value-added technique for sales taxes that do not extend completely through theretail sector. Most of these taxes, which have VAT-like characteristics,are restricted to the manufacturing and extractive industries.13 Amongthe low-income countries of Asia, China applies a limited VAT to a fewindustries. India intro;uced a restricted VAT in 1986 which now covers allsectors except textiles, tobacco product-, petroleum products, matches anda few other items and the VAT is under consideration as a tax reform optionin Pakistan. As is to be expected, however, the proportion of taxpayers tototal population is much lower in developing than in the industrialcoulntries.

Rate Structure

2.38 The VAT used by most countries either has a zero rate or anexemption applying to necessities, a standard rate for the majority ofsectors, and a higher rate applicable to luxury items and those goods whoseconsumption the authorities wish to discourage. Table 2.6 provides someexamples. It shows the main rates of VAT and additional rates applying toa subset of goods in the EEC countries (which have the longest experienceof using VAT), other European countries, selected Latin American countries,and in New Zealand, Taiwan (China), Indonesia, and Korea. The rates shownare those that apply to domestic sales; virtually all of the countrieszero-rate exports. The largest number of different rates is seven (inBelgium), but two or three rates are more common. In Asia, Indonesia has asingle rate while Korea and Taiwan, China which began with single rates nowhave three rates.

2.39 All the countries listed in the table have additional taxes onparticular commodities. These are separate from the VAT and are thereforenot subject to refund. In the European Community these additional taxesare mainly in the form of excise taxes on tobacco, alcohol, gasoline anddiesel oil. The rates vary widely from one country to another, but areoften higher than the VAT levied on the goods in question. In Indonesia,the additional taxes are levied at either 10 percent or 20 percent on goodsthat are regarded as luxuries. In Korea, there is a Special Excise Taxthat is levied at rates between 5 percent and 100 percent on selectedgoods.

2.40 International opinion is somewhat divided as to what framework isappropriate for the tax treatment of luxuries and other goods whoseconsumption the government wishes to discourage. One option is theincorporation of luxury rates on income-elastic goods within the VAT, withadditional sumptuary excises on items such as tobacco and alcohol. A

13/ These taxes, which some authors have preferred to call "embryonic"consumption taxes, accounted on average for 22 percent of total taxrevenue in 1982 in a sample of 13 sub-Saharan Africa countries; eightof these were low income countries. See Z. Shalizi and L. Squire:Consumption Taxes in sub-Saharan Africa: Building on ExistingInstruments (World Bank, June 1986, processed).

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Table 2.6. The Rate Structure of VAT in Selected Countries

Main Other Number ofRate VAT Rates Rates

Argentina 18 9 2Austria 20 10, 32 3Belgium 19 1, 6, 17, 25, 33, 0 7Denmark 22 0 2France 18.6 2.1, 4.5, 5.7, 33.3 5Germany 14 7, 2 3Greece 18 3, 6, 36 4Hungary 25 15 2Indonesia 10 - 1Ireland 25 2.2, 10, C 4Israel 15 6.5 2Italy 18 2, 9, 38, 0 5Korea 10 2, 3.5 3Luxembourg 12 3, 6 3Netherlands 20 6, 0 3New Zealand 10 - 1Norway 20 11.11 2Portugal 16 8, 30, 0 4Spain 12 6, 33 3Sweden 23.46 3.95, 12.87, 0 4Taiwan, China 5 15, 25 3United Kingdom 15 0 2

30urce: A. A. Tait, Value added tax: International Practice and Problems,(International Monetary Fund: Washington, D.C. 1988).

- 20 -

second opinion is the use of a single rate VAT with exemptions and/or zerorating for necessities, coupled with sumptuary excises outside the VAT.Since the higher rate(s), would normally apply to final rather thanintermediate goods, the choice between those options does not raise issuesof crediting which would normally create a preference in favor of the VAT.The advantage of not proliferating rates within the VAT is that itsimplifies administration, a consideration that leads the mission trecommend supplementary excises.

Revenue Growth

2.41 The replacement of existing indirect taxes by a VAT with asimplified rate structure and supplementary excises can be made revenue-neutral by suitable choice of rates. While this is reassuring, it would beadditionally useful if adoption of such a tax system were to ensure revenuegrowth from indirect taxes in line with GDP. This is a highly desirablefeature of a tax system, since it does not require revenue generation to bedependent on frequent changes in tax rates. Such changes, when introducedfor purely budgetary reasons, typically pay insufficient attention toissues of efficiency and resource allocation and introduce uncertainty indecision-making for households and companies, with deleterious consequencesfor efficiency.

2.42 The question of revenue growth is addressed both theoretically andby examining data from other countries. Turning to the first, the taxreform proposed by the mission would move taxes away from the productivesector and towards households. This is the essence of consumptiontaxation. Since consumption is the single largest component of nationalincome, such a move ensures that tax revenue will move at least in linewith gross domestic product. This is further supported by the fact thatlow rates of tax are applied to necessities, whose demands grow relativelyslowly as income grows, and higher rates to luxuries whose demands growrelatively rapidly.

2.43 Cross-country, evidence as reported in Table 2.7 shows that manycountries have experienced an increase in revenue from VAT plus other taxeson goods and services as a proportion of GDP from 1975 to 1985. Exceptionsare provided by Belgium, Denmark and Korea in the latter subperiod andItaly and, less noticeably, Norway in the former. Although this reflects acombination of changes in tax rates as well as the responsiveness ofrevenue from a fixed tax structure, the evidence suggests that countriescontemplating the introduction of a VAT could, in general, expect tomaintain growth of indirect tax in revenue in line with that in GDP.

2.44 In interpreting the theoretical argument and the above evidence,it should be borne in mind that the countries identified by the table havea VAT that extends through the retail level. This implies that the tax islevied on final consumers and is, genuinely, a consumption tax. This ishowever not true of the manufacturing-cum-import stage VAT recommended bythe mission for Bangladesh. Since small scale and unorganizedmanufacturing, much of wholesale and retail trade and agriculture would notbe subject to such a VAT, this implies that, strictly speaking, the taxwould not be levied on final consumption. Nevertheless, inasmuch as therecommendations move the point of taxation closer to consumption, theevidence presented in Table 10 is relevant in judging the buoyance of taxrevenues under the proposed VAT.

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Tabll 2.7, Growth of Indirect Tax Revenue in Selected Countries(Domestic Tax on Goods and Services as Percent of GDP)

First Yearof VAT in

1975 1980 1985

Argentina 1975 3.5 5.9 7.8Austria 1973 8.5 8.8 9.4Belgium 1971 9.8 10.6 9.6Denmark 1967 13.7 16.7 16.3France 1968 11.7 12.2 12.3Germany 1968 6.5 6.6 6.7Ireland A/ 1972 9.4 10.9 13.5Italy 1973 8.2 7.7 8.2Luxemboureg _/ 1970 8.0 8.4 10.4Netherlands 1969 9.5 10.4 10.3Norway 1970 16.3 16.2 17.4Sweden 1969 9.3 10.3 11.9United Kingdom 1973 8.4 9.8 11.5Israel 1976 - 12.8 16.0Korea 1977 - 8.2 7.9

a/ Figures refer to 1984; those for 1985 were not available.

Source: Government Finance Statistics. International Monetary Fund,(Washington, D.C.).

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4. Coverage of a VAT

2.45 The manufacturing-cum-import stage VAT recommended by the missionwould initially apply to the "organized" sector and therefore include thesame taxpayers as are liable for customs and excise tariffs. A widening ofthe base should occur through (i) adoption of a more comprehensive customsand excise tariff such as the Harmonized System of Nomenclature (furtherdescribed in Chapter 3) and concomitant removal of exemptions; (ii) generalstrengthening of customs and excise administration along lines detailed inChapter 3; and (iii) the process of industrialization over time. In turn,deepening coverage of the tax system to the retail level could beintroduced on an experimental basis for a few items for example, selectedPOL products. However, any significant progress at that level must awaitthe emergence of retail outlets that are large enough to make registrationfor tax purposes cost-effective for the authorities.

5. Existina Instruments

2.46 The NBR is aware of the problems of cascading that arise fromtaxation at various stages of the production process. To that end, limitedprovisions have been introduced for relief of excises and CDSTs paid on rawmaterials entering domestic and export production. Since the principle ofnoncascading taxation has been accepted and finds practical expression inthose provisions, it is suggested that the manufacturing--cum-import stageVAT be introduced by building on existing instruments. Accordingly, thefollowing paragraphs review current experience with the functioning ofthose instruments and suggest how they should be strengthened and extendedto help underpin a VAT.

A. Input Duty Relief for Exports

2.47 When imported inputs subject to CDSTs and domestic inputs subjectto excise taxation are used in export industries, the competitiveness ofBangladesh products in world markets is adversely affected. For thisreason, GOB has introduced a number of provisions for administering inputduty relief.

CDST Relief

2.48 Sections 21, 31 and 95 of the Customs Act, 1969 read with therelevant provisions of the Sales Tax Ordinance, 1982, provide the legalframework for repayment of CDSTs, drawback of CDSTs and manufacture inbonded warehouses for export.

2.49 The following drawback (repayment of CDST), manufacture-in-bondfacilities and deemed exports are allowed by the NBR.14

14/ For a discussion of these systems in the context of export policy andadministration, see Y. Rhee "Export Policy and Administration:Bangladesh" (World Bank, February 1986, processed).

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(a) Repayment at specified rates of CDSTs paid on importedraw materials used in the production or manufacture ofspecified goods available to manufacturer-cum-exporters.At present 23 such products have been identified ['flatrate duty drawbacks"]. Commercial exporters do notqualify for such relief.

(b) Repayment of CDSTs paid on raw materials used in themanufacture of any goods which are sold against foreignexchange in Bangladesh or supplied to export-orientedindustries against back-to-back letters of credit["conventional duty drawback"].

(c) Repayment of CDSTs paid on raw materials used by a localmanufacturer of goods sold in Bangladesh throughinternational tender against payment in foreign exchange["deemed exports"].

(d) Clearance without payment of customs duties on rawmaterials for the manufacture of goods in bond undercustoms supervision for sale against internationaltender or against payment in foreign exchange ["bondedwarehouse"].

(e) Packing and raw materials imported free of CDSTs for themanufacture of goods for export under the NotionalPayment of Drawback of CDST Rules, 1983 ["notional dutydrawbacks"]

Excise Tax Relief

2.50 Rules 12 and 13 of the Excise and Salt Rules, 1944 provide forrebate of excise duties paid on goods exported and for export under bond ofgoods on which duty has not been paid. The current provisions for exciseduty relief on exportable goods are enumerated below:

(a) The excise law provides for export of excisable goods inbond. In such cases the manufacturer of the excisablegoods furnishes a bond to the Collector of Excisewhereupon he is permitted to export on payment of exciseduty a specific consignment of goods. The bond iscancelled upon proof of export and rebate of excise dutygiven to the exporter. The rebate is available tomanufacturers and commercial exporters who export fromthe factory under the above procedure.

(b) A similar provision exists for export of excisable goodsin bond without payment of duty.

(c) There is also a provision for rebate of excise duty paidon raw materials and packaging materials used in themanufacture of goods for export. The facility isavailable to manufacturers and not to commercialexporters.

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B. Inout Duty Relief for Domestic Production

CDST Relief

2.51 The NBR has also been providing partial or full relief from CDSTsfor specified raw materials or components in particular industries fordomestic production. For instance, there is a provision for repayment ofCDSTs paid in excess of 40 percent on B.P. Sheets imported by ChittagongSteel Mills Limited to manufacture C.I. Sheets. Other examples include therepayment of customs duty in excess of 50 percent paid on imported rawmaterials by manufacturers of indigenous agricultural hand-sprayers and therepayment of customs duty on polythene pellets imported by fertilizerfactories to manufacture polythene bags required for packing fertilizerproduced by them.

Excise Tax Relief

2.52 The mission is not aware of any provision for tax relief onexcisable inputs entering into the production of outputs subject to exciseduty.

6. Assessment of Drawback/Relief Procedures

ExRorts

2.53 The existing treatment of exports described above has twocharacteristics. First, it embodies the variant of the VAT known as the"destination principle", i.e., exempting exports from taxation whileimposing taxes on imports.15 This is consistent with internationalpractice as all national level value added taxes have been imposed on thedestination principle. Second, the existing arrangements, in as much asthey ensure CDST-and-excise-duty-free access to inputs for exporters via acombination of drawback and rebating provisions, treat exports as a "zerorated" activity. The following discussion is to be seen as suggestingimprovements in the existing procedures that move the system towards a VATwith zero-rating for exports.

2.54 No figure for rebates and refunds given on exports were availableat the NBR.16 However, it is the mission's impression that existingprocedures for drawbacks are cumbersome and inhibit exporters. Thenotional duty drawback scheme has not been used to any great extent.Licensing and renewal procedures for manufacture in bonded warehouses areintricate and time-consuming. They also present opportunities for fraudand corruption. Thus, the mission was informed that high CDST rates haveled to leakages from bonded warehouses and into the open market. There arealso instances of collusion between exporters and their associates inforeign countries who "certify" the export of high priced items in order toclaim higher refunds on imported raw materials. Although some

15/ It will be recalled that the only commodity subject to export duties iswet blue leather.

16/ Total figures representing rebates and refunds on exports as well asother refunds were about Tk 47 crore in FY85-86 and about Tk 10 croreduring the first quarter of FY86-87.

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administrative strengthening to limit such illegal activity is possible andis suggested below, it is clear that there are significant incentives forsuch behavior. This is because of the following tradeoff: high rates ofCDST discriminate against exports while drawback and bonded warehouseprovisions seek to offset its effects. Since the former influence isevidently dominant, the mission believes that the most effective way toensure the functioning of drawback-cum-rebating schemes would be to reduceCDSTs and quantitative restrictions on imports across the board. Asmentioned before, GOB is committed to accomplishing those goals via (i)reduction of tariff slabs; (ii) lowering of CDST rates on items in textilesand in the steel/engineering sectors; and (iii) phased elimination ofimportable items on the negative and restricted lists.

2.55 Turning to administrative procedures, the mission suggests, first,that the Drawback for Manufactured Export Rules, 1970, be suitably revisedon a more liberal and flexible basis and provide for drawbacks on exportsby commercial exporters as well. Second, the bonded warehouse systemshould be streamlined, both with respect to licensing as well as to customsprocedures for (i) manufacture of garments with bonded raw materials forexport, (ii) manufacture of 100 percent exportable goods (other thangarments) with bonded imported raw materials for exports, and (iii) storageof non-duty paid goods in bonded warehouses for subsequent clearance onpayment of duty. Third, incentives should also be available to indirectexporters by applying the inland back-to-back credit to all direct andindirect exporters. Fourth, the product coverage of the flat rate drawbacksystem should be considerably enlarged.

2.56 The mission further understands that the provisions for excise taxrelief on exportable production have not been widely used. However, withthe government's stated intention of increasing reliance on domesticsources of revenue, the facility is likely to assume greater importance inthe future. For this reason, the mission, while endorsing the aboveprocedures, suggests that (i) the rebate of excise duties on raw materialsand packaging materials used in exports should also be made available tocommercial exporters; (ii) the manufacture of goods in bond for exportwithout payment of excise duty on inputs should be allowed; and (iii)similar facilities should be accorded to "indirect exporters," i.e., thosethat supply inputs to direct exporters, along lines discussed in thesection on duty drawbacks above. Such units should receive tax relief onthat proportion of their total output sold to direct exporters.

2.57 Efficient administration of the above systems will requiretechnically trained staff capable of fixing rates of drawback for importantcommodities. It is desirable that these be based on average amounts ofCDSTs and excises on inputs and, in particular, that fine-tunl., of thesystem not be attempted. Such staff should be located in the existing DutyExemptions and Drawback Office (DEDO) cell in the Directorate of Inspectionwhich should beceme the nucleus of a separate independent Directorate ofDrawbacks, Manufacture in Bond and Rebates under the NBR. Theorganizational implications of this recommendation in relation to the restof the NBR are examined in Chapter 3. Furthermore, to ensure the extensiveuse of the excise relief facilities, the mission recommends that separateofficers in the Excise Collectorates of Dhaka, Khulna and Chittagong beentrusted with dealing with rebate claims expeditiously.

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Domestic Production

2.58 There are a number of directions in which provisions for CDSTrelief on inputs entering domestic production must be extended. First, theCDST relief provision should be made available not just to specifiedmanufacturers but to all manufacturers in an industry that is registeredfor excise taxation, as in the handsprayer and fertilizer examplesmentioned in paragraph 2.44. Second, they should be extended to cover moreitems. Third, the NBR should allow domestic manufacturers registered forexcise taxation to get relief from excise duty paid on inputs.

7. Rationale for Proposed VAT Variant

A. Crediting

2.59 The mission recommends that the proposed VAT be of the credittype. Under this method, the tax already paid by the firm on its purchaseinvoices is subtracted from the tax liability on its output and thedifference is forwarded to the exchequer. Except for "in bond" facilitiesdescribed above, all existing administrative instruments in Bangladesh relyon drawbacks and refunds. None employs the crediting principle. Thissection discusses the advantages of crediting over other methods ofcalculating tax liability17 and recommends the wider use of such proceduresin providing input duty relief.

2.60 First, the crediting method has the following "self-policing"characteristics. The seller's invoice on any taxable sale from one firm toanother shows the gross VAT paid on the sale. Under the credit system, thebuyer can subtract the latter amount from the gross tax on his sales.Thus, Drovided the buyer's and seller's invoices are identical, anyincentive on the buyer's part to overstate the tax paid on the transactionis offset by precisely the opposite incentive on the seller's part. This"self-policing" nature of the tax would be substantially diluted if the twoinvoices were different, with the seller's (buyer's) understating(overstating) the tax liability. Hence, a credible threat of selectivechecking of invoices on the part of the tax administration would benecessary to promote tax compliance even under the credit system. Second,the tax-credit method removes pressures to exempt various activities fromfrom the purview of the tax, since those who seek favored tax treatmentwould wish to avoid breaks in the chain which would otherwise causepractical difficulties in calculating tax liabilities of "downstream"firms. Notwithstanding the above, it will however continue to be the casethat manufacturers will buy part of their inputs from stockists,wholesalers and retailers who do not possess documents indicating thattaxes have been paid on such inputs. To the extent that this is the case,the NBR could consider "deemed-to-have paid" provisions in applying thecrediting procedure. An example of Indian experience in this regard isprovided in Appendix 2.3.

2.61 The mission recommends that the NBR modify existing administrativeinstruments in the direction of crediting as far as possible. It shouldreplace existing repayment provisions for CDSTs paid on imports entering

17/ All national level value added taxes use the tax-credit method ratherthan the so-called "addition" or "subtraction" methods.

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domestic production as well as the mission's suggestions in Sections 6 and7 for extending them to more commodities. It should also characterize theproposed scheme for introducing excise tax relief on inputs entering intodomestic production in selected sectors.

2.62 The application of the tax crediting method to exports is limitedby the fact that the latter are not taxed. Hence, under a system of zero-rating, an exporting firm qualifies for refunds from the government unlessit has tax liability on domestic sales in excess of the tax credit earnedon exports. Hence, zero rating can be administratively burdensome forreasons elaborated on in the previous discussion of duty drawback systems.The mission recommends that payment of drawbacks, once fixed, should bemade speedily. The more complicated the procedures for obtaining refunds,the less the value of the provision awarding exporters access to CDST andexcise tax free inputs.

B. The Consumption BAse

2.63 The mission favors the introduction of a VAT of the consumptiontype, i.e., one which allows credit not only for taxes paid on rawmaterials but on purch.ases of capital goods as well. This would introduceno distortion in input choices, thereby promoting efficiency in production.

2.64 Existing drawback/repayment procedures in Bangladesh do not coverpurchases of capital goods. The mission therefore recommends that capitalgoods be brought within a purview of the drawback provisions as well as thecrediting procedures whose introduction has been proposed above. This hasthe following notable administrative implication. Significant purchases ofcapital goods in a given year would lead to excess credits and the need forrefunds in such a year. The tax administration must expedite the paymentof refunds in order to ensure that the exemption of capital goods is ameaningful provision of the tax system.

V. PHASING IN A VAT

2.65 The twin problems of (1) narrowness of the existing tax base and(2) lack of experience with crediting procedures implies that a number ofsteps are necessary to phase in a rudimentary VAT in Bangladesh over athree-year period. The following paragraphs outline the issues whichrequire attention.

2.66 The NBR should implement the recommendations made above onstrengthening and extending drawback and crediting procedures (a) for CDSTson inputs entering into both exports and domestic production and (b) forexcises on inputs entering into both exports and domestic production.Since that part of step (a) which deals with input relief for exportproduction has already been agreed by GOB as part of the Industrial SectorCredit, the customs administration will acquire valuable experience inoffsetting tax-induced discrimination against exports. With theimplementation of measures recommended in Chapter 3 to strengthen indirecttax administration and, a fortiori, reduce administrative pressure on thecustoms wing, it would be necessary for the latter to implement CDSTcrediting for inputs entering into domestic production as well. Step (b)should be extended to cover all excisable goods except those produced inestablishments below a certain threshold side.

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2.67 To make the excise tariff comprehensive in coverage and match itreadily with the customs tariff, the Harmonized System of Nomenclature(HSN), whose advantages are discussed in Chapter 3, should be introducedand implemented to permit a removal of exemptions and hence a smoothertransition to a manufacturing-cum-import stage VAT.

2.68 The NBR should institute programs to (1) educate the taxpayingpublic about the provisions of the crediting/drawback procedures; (2) movetowards appropriate legislation necessary for the VAT; (3) train staff toadminister the new tax; and (4) strengthen the machinery required for itsauditing, collection and enforcement.

2.69 The Directorate of Research and Statistics in the NBR, oncereorganized along lines detailed in paragraphs 3.25 to 3.31, should conductbackground work to ascertain what standard rate of VAT would be appropriatein the light of revenue requirements. It is important that the VAT have nomore than one or two rates in order to keep it administratively manageable.

2.70 As a result of the above steps carried out over a three-yearperiod, Bangladesh should replace all indirect taxes except protectivecustoms duties by a rudimentary VAT applying to the organized sector at acommon rate. A VAT at a standard rate could be supplemented by a set ofexcises on production and import of selected luxury items and other itemsthe consumption of which the government might wish to discourage. Thesystem would "ero rate" exports and exempt all other sectors such asagriculture, small scale and unorganized manufacturing and much ofwholesale and retail trade. This implies that, while exporters would notbe taxed on their inputs, the exempted sectors mentioned above wouldcontinue to pay taxes on their inputs. Experience suggests that such arate structure could provide a moderate degree of progression in the taxsystem, a feature that would be enhanced by the dependence of the poorestfamilies on nonmarketed food.

2.71 Further progress with the tax system relates principally to thedepth of coverage and the ultimate extension of the rudimentary VAT to theretail level. While the NBR should progressively extend the taxation ofitems such as POL products which are sold in retail establishments over acertain size, it is understood that a significant deepening of coveragewould grow Rari Rassu with industrialization.

2.72 One final issue not examined above is the question of thedepartment responsible for the administration of the VAT. The outlineproposed above entrusts such responsibility with the customs and excisewings. The mission's recommendations on tax administration are designed tostrengthen its working over the immediate future. However, since theassignment of master identification numbers for taxpayers which would allowfor cross-checks of income taxation and VAT with resulting positive revenueeffects on both is the ultimate long-term goal, the question of closerintegration with the direct tax wing of the NEBR is one that merits furtherexamination as the various steps in the phasing in of the VAT begin to beundertaken.

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VI. REFORNING TAKES TO RAISE REVENUE

2.73 The discussion in Sections IV and V has described the contours ofan indirect tax system that can serve as an elastic source of revenue whileimposing a lower economic cost on taxpayers. Revenue needs are, however,urgent, so that it is necessary to describe measures that (1) could raisesignificant amounts of revenue within the existing system without adverseimplications for progressivity of incidence and (2) are consistent with thelonger term objectives of moving away from trade-based taxes and towardsdomestic sources of revenue. This is the task of the present sect'on. Adescription of such measures is also particularly important in view ofrevenue losses arising from extension of drawback, "in bond" and creditingmeasures that would occur under the introduction of the rudimentary VAT.Another reason is provided by the argument of paragraph 2.32 that it wouldbe preferable to finance protection as far as possible from general sourcesof revenue.

1. Excises: Revenue and Distribution

2.74 The increase In excises on the particular goods set out in Table2.6 have been suggested bearing in mind a number of considerations. Theseare to (1) raise significant amounts of revenue within the existing system;(2) keep excise rates below 25 percent wherever possible so as not toaffect the cost structure of domestically produced internationally tradedgoods too adversely; (3) focus on final goods as far as possible; (4) notinterfere with progressivity of incidence and (5) concentrate on goodswhere the administrative situation is in hand. These proposals could beimplemented as soon as the authorities wanted to do so for revenue-raisingpurposes.

2.75 Package 1 in Table 2.8 raises statutory excise rates on a varietyof presently excisable items to around 10-15 percent, with the tax onluxury items being increased above the 20 percent range. Where a rate isdoubled, it is assumed that the total tax rate (described in paragraph2.17) is doubled. The lowest excise tax rate, 10 percent, would be foritems such as tea. In a second variant of this package (la) the tax on teais omitted to examine the distributional consequences of such a measure.This is because a tax on tea is likely to affect distribution, productionand employment adversely, since it is consumed by all income classesincluding the poorest, its production involves the rural landless and it isan important export crop. While the tax on cement may appear paradoxical,given the emphasis on moving towards final goods taxation, this is perhapsthe easiest way of taxing luxury housing and construction.

2.76 Package 2 includes a tax on edible oils of 15 percent, andincreases the excises on woollen items (from 5 percent to 15 percent), andmild stael goods and ceramics (from 5 percent and 10 percent respectivelyto 20 percenri). Again, since the tax on edible oils may be regressive, theestimation of the effects of Package 2 is repeated without the excise taxon edible oil.

2.77 Package 3 considers the effects of a 20 percent uniform tax on allitems included in Packages 1 and 2.

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Tble 28: Suimr of Proposed Ercise Tax Rate Changes

From To

Packaze 1

Tea 2.52 102Sugar 10.0: 202Aerated waters 10.02 252Cement 10.02 202Cosmetics 10-201 20-402Soaps. *tc. 9.01 202Cotton/synthetic fabrica 1.42 152Battery Cells 8.02 152' 3dio/TV/fsns 15.2O 352VehicLes S-1OX 15-302Cigarettes ->2002 -p2302Petroleum 2-92 5-25S

Package 2 (as Packase 1 Plus)

Edible oils 0.02 152Woollen items 5.02 152Mild steel products 5.02 202Ceramics. etc. 10.02 202

°acka}e 3

Tea 2.5X 202Sugar 10.02 202Aerated waters 10.02 202Cement 10.O1 102Cosmetics 10-202 202Soaps. etc. 9.02 202Cotton/synthetic fabrics 1.4S 201Battery cells 8.02 202Radio/TV/fan 15.2O 202Vehicles 5-102 202Cigarettes ->200S -p2302Petroleum 2-92 5-252Edible oils 0.02 202Woollen items 5.02 202Mild stee' products 5.02 20SCeramics, etc. 10.02 202

Note: The existing rates refer to the situation in 1985/86.

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2.78 The taxation of cigarettes in Bangladesh is heavy but still, as apercentage of the price, below the levels in India and Pakistan and in manyother countries in the world. The elasticity of demand is fairly low andthe distributional impact is not regressive. However given that thegovernment has recently tightened import regulations and enforcement andthat taxation levels are below those of neighboring countries, thereremains some scope for extra revenue. The recent increase in price ofcigarettes following the tightening of regulations and enforcement suggeststhat profit margins have not been eroded, so that much of the tax increasemight be absorbed in these margins. If price increases become excessive inthe judgement of GOB it should consider importing cigarettes throughauthorized channels to control the price whilst also yifslding furtherrevenue through customs duties.

2.79 The framework used to evaluate these tax changes is described inChapter 4. The net revenue effects reflect reductions in CDST collectionsas a result of production, demand and factor reward changes induced by theadditional excises. The distributional effects are determined for 8 ruraland 2 urban occupational groups.

2.80 The data do not permit categorizing groups for the analysis ofdistribution on the basis of per-capita income levels. It is thereforeassumed that the landless, small farmers, rural informal and urban informalgroups form the "poor". The "urban formal" group is taken asrepresentative of the 'rich', although there will evidently be someconsiderable variation in income levels within each group. The modelestimates are likely to overestimate the tax impact on the poor, given thecommodity-composition of consumption groups and tax-groups. Thuscigarettes consumed by the rural landless are likely to be 'biris', uithless tax, rather than higher quality cigarettes which bear higher rates oftax (and recommended tax increases). Similarly 'clothing' consumed by therural poor may well be from home spun cloth, which would not bear the taxrates implied in the model. Thus the results presented here provide a"pessimistic" appraisal of distribution, and the 'actual' distributionalimpact will bear less heavily on the poor. By the same token, the impacton the rich will be underestimated, given the poor coverage of the higherincome groups in most household income surveys. Thus the 'true'distributional impact of the measures will be more 'egalitarian' than thatshown here.

2.81 Tables 2.9 and 2.10 present the revenue and distributionalconsequences of the three packages, on the assumption that wages in allsectors are flexible.18 Package 1 raises 5.5 percent of additionalindirect tax revenue or Tk 1230 million net (after losing 1.7 percent inCDST losses); but this figure falls to around 3.4 percent net (or Tk 750million approximately) if the tax on tea and petroleum are excluded.Package 2 raises Tk 1800 million net if edible oils, woollen items, MSproducts and ceramics are included, and almost Tk 1550 million if edibleoils are excluded. Uniform excises (with the exception of cigarettes) of 20percent raise around Tk 2.6 billion in additional revenue.

18/ Revenue effects are measured at 1984/85 prices.

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Table.9L2. Revenue Effects of Excise Tax Changes(Millions of Taka)

Excise CDST Total

Package 1 1,558.2 -324 1,234.1Package la 996.3 -234.1 762.2

Package 2 2r402.6 -594.5 1,808.2Package 2a 1,941.3 -395.4 1,545.8

Package 3 3,248.3 -623.3 2,625

Initial Revenue 6,919 15,586 22,505

Note 1: Package 1: (as described in Table 2.6)

Package la: (as Package 1, but excluding the tax on tea andpetroleum).

Package 2: (as described in Table 2.6).

Package 2a: (excludes the tax on edible oils).

Package 3: (as described in Table 2.6).

Note 2: Cigarettes are taxed at 230 percent of the ex-factory valueacross all packages.

Note 3: Revenue effects are measured at 1984/85 prices and based on1984/85 production figures and collections.

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Table 2.10. Distributional Impact of Excise TaxChanes on Real Income (Percent)

(1) (2) (3) (4) (5)Socio- Package Package Package Package PackageEconomic No. 1 No. la No. 2 No. 2a No. 3Groups

Landless 0.98 0.71 1.98 1.14 2.30

SmallFarmers 1.08 0.69 2.05 1.20 2.39

Medium-Tenants 1.15 0.70 2.12 1.25 2.49

Medium-Owners 1.13 0.69 2.09 1.23 2.45

Large 1.14 0.69 2.13 1.24 2.50- Farmers

LargestFarmers 1.14 0.69 2.13 1.25 2.49

RuralInformal 1.01 0.69 1.79 1.14 2.10

RuralFormal 0.76 0.52 1.48 0.88 1.68

UrbanInformal 0.61 0.54 1.41 0.79 1.58

UrbanFormal 0.70 0.54 1.49 0.89 1.67

Note: For an explanation of the numbers, see the text.

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2.82 The distributional consequences of these changes are shown inTable 2.10 as percentage changes in real income levels and are to beinterpreted as follows. The impact of Package 1 (described in Table 2.10)on real incomes of each socioeconomic group are calculated. However, tohighlight the distributional impact of the package, the impact on eachgroup is presented relative to the average impact on all groups as a whole.Thus, in column (1), the negative impact on real incomes of the landless is98 percent of the average, while that on small farmers is 108 percent ofthe average. Similarly, to facilitate comparison across packages, theimpact of each package on real incomes is presented relative to the averageimpact of Package 1. Thus, for example, since all the numberscorresponding to Package 2 are greater than those corresponding to Package1, it is clear that the former has, as is to be expected, a moredeleterious impact on all groups. The landless, however, are again lessaffected by Package 2 than small farmers.

2.83 It may be seen that Package 1 is fairly progressive within ruralareas, but appears to affect the 'formal sector' and the urban householdsless than the others. The overall picture is one of a relatively uniformdistributional impact. Removing the tax on tea makes the impact on ruralhouseholds appear proportional, and reduces the differential impact acrossthe rural and urban households, without greatly affecting the overallpicture. This pattern is repeated with the other packages, although the 20percent uniform tax (Package 3) accentuates the urban-rural differentialimpact.

2.84 The distributional impact of changes in indirect taxes dependsinter alia on the combination of higher final prices and lower wages thatresult from tax increases. For that reason, and in absence of consensusabout processes of wage formation in Bangladesh the calculations were doneunder three assumptions about wage behavior.l0 In the first variant, theeffects of tax changes are allowed to affect wages in all sectors equally.The second variant, on which the results of Table 2.9 and 2.10 are based,keeps the wage rate fixed in response to tax policy changes. Variant 3allows two-tiered wage effects, with wages in the food sectors fixed, andthose in the remaining sectors determined by the average of those sectors.An exploration of the various packages with variants 1 and 3 (recallingthat the variant 2 results are presented in Tables 2.9 and 2.10) confirmsthat the tax changes would not accentuate inequalities and that they wouldbe roughly proportional. Given that these estimates reflect pessimisticprogressive outcomes, the actual patterns of consumption and tax ratechanges may bear less heavily on the poor than the rich.

2. Public Sector Pricing

2.85 An increase in the price of a publicly supplied good is like anincrease in indirect taxation: it will generally increase public revenueand increase prices to the private sector. A complete study of publicrevenues should therefore include an analysis of public-sector prices andapply the same principles as used for the analysis of indirect taxation.The mission did not have the resources to study the scope for resource

19/ These are discussed in Appendix 4.1 of Chapter 4.

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mobilization via public pricing on a sector-by-sector basis. However, theconsequences of raising administrative prices to marginal costs of supplyhave been examined for the energy sector by the Energy Sector Pre-Appraisaland Appraisal missions and to some extent for other sectors by the CountryEconomic Mission. This section draws on the work done by those missions.

2.86 It is desirable that prices of publicly produced goods andservices to intermediate users, viz., electricity for industrial uses beguided by social opportunity costs and that prices to final consumers, asin the case of electricity for final sales incorporate a premium oversocial opportunity cost to reflect the sector's contribution to domesticresource mobilization. Indeed, raising prices to social opportunity costsalone could raise substantial public revenue. In the case of nonrenewableresources, the calculation of marginal costs should reflect the relevantdepletion profiles and eventual costs of substitutes.

Power andGa

2.87 The Energy Sector Missions have recommended a series of priceincreases for electricity and natural gas. Recommendations in theelectricity sector seek to achieve a rate of return on revalued assets of8.5 percent in FY88, 9.5 percent in FY89 and 10 percent thereafter. Table2.11 shows the incremental revenue that will be retained by the BangladeshPower Development Board (BPDB) under that scenario to finance itsinvestment programs, thus making possible savings in the Annual DevelopmentProgram (ADP). These range from an additional Tk 112 crore in FY88 to Tk1107 crore in FY92. The recommendations on gas tariffs seek a 25 percentincrease in real terms in FY88 and FY89 in order to bring prices in linewith economic costs. With a 10 percent rate of inflation, this is Case 3in Table 2.12. The difference between Case 3 and Case 1 ranges from anadditional Tk 170 crore in 1988 to Tk 2240 crore in FY92. It is furtherproposed that the ratios of internally generated funds to the companies"annual investment programs be no smaller than 10 percent in FY89, 20percent in FY90, 30 percent in FY91, and 40 percent in FY92 and thereafter.Thus, no gas company would be permitted to declare a dividend until theabove target had been achieved. 20

2.88 As noted above, the strategy of relying principally on increasesin administered prices over and above that assumed in the ADP and using theresulting revenue for investment leads to a saving on the ADP. On theother hand, there is no direct increment to government revenue accounts andthus no contribution to raising the target government revenue to GNP ratio.Suppose, however, that the price increase on natural gas occurred viaexcise taxation -- a strategy followed in the recent past. If thatrevenue were then lent to the gas companies for investment (and the loansubsequently restructured as a grant) the real effects would be analogousto the increased prices and retained earnings of the previous case.However in that case there would be an increase in government revenue witha corresponding deterioration in the ADP account. Whilst recognizing thatthe proposals of the energy sector mission do not imply a direct increase

20/ Cf. Banladesh- Energy Sector Credit, Development Credit Agreement(Yellow Cover; World Bank, July 29, 1987).

- 36 -

Zd*ILLZ. Bagladesh Poawr D.ve"oPMeUt Boardorteost Revenue FYY8-PT2

(uines oet take)

7187 ne88 FY89 nYoo FY91 FY92

Generation (glb) 5600 6403 7500 6585 10094 11406

Systens (Losses (2) 32 30 28 27 27 27

sales (gI) 3608 4402 5400 6260 7369 8328

Cas-1

Avorage Rvenaue 2kh 1.70 1.70 1.70 1.70 1.70 1.70

Operating Revenue 6474 7620 9180 10553 12527 14155

Other Reveona 211 394 512 G6e 739 895

Operating p Is 7490 8770 9969 11498

Operating molnce fAm lS12 239 57 3

Case-2

ariff Inpregae to Kebt ga! fran FY88 Onwards

Aver*e Revwnue U/lUM 1.70 1.95 2.21 2.39 2.72 3.03

Increases in ?rlffC(S) 0.0 14.7 13.3 8.1 13.8 11.4

-perating REvenoe 6474 8740 11934 14977 20043 24229

Otbhr Revenue 211 394 512 688 739 895

Operating Zqpenses 7494 8770 996l 11498

Operating moao i34E 10813 14620

Increental Revenue

Due to Tariff Incoass, 0 1121 2754 4324 7516 11074

1. Gener tin As per POD'c Forecast.

2. 8yte_ Lose As Coadition of Energy Sector Credit 68BASPA178)

3. Depreletien At 3.22 of Not Average Flied Aseos in Operation (Included

in the Oereting Expenses) based on Investmnt in Priority

Investent Progr .

- 37 -

ITkalL212: Revenue Forecast for Gas Subsector(1k mUllion)

FY87 FY88 FY89 FY90 PY91 PY92

(1) Case - 1 N/

Gas sales/other lrcanA 3,870 4,450 4,990 5,530 6,000 6,600

Operating expenses 510 650 050 1,050 1,250 1,500

Fin & Non-op. expnses sfl hB 0 20Revenue before duty/tax 2,970 3,400 3.670 3.970 4,150 4.400

(2) Case - 2

Gas sales/other income 3,870 5,430 7,270 9,620 12,600 16,000

Operating expenses 510 850 850 1,050 1,240 1,500

Fin & Non-op. expenses 390 'A0 470 S 600 700

2,970 4,380 5,950 8,060 10,760 13,800

(3) Case - 3 cl

Gas sales/other income 3,870 6,220 9,270 13,700 19,800 29,000

Operating expenses 510 650 850 1,050 1,250 1,500

Tin & Non-op. expenses 3L9 An 470 510 700

2,970 5,170 7,950 12,140 17,950 26,800

Major Assuritions

- Gas sales (BCF) 130 160 180 200 220 240

(now under review)

- Domestic inflation 122 102 101 102 10 101

21 Csse 1: no increase in tariff levels

Case 2: Annual Increase of 202

¢/ Case 3: Annual increase of 352

Remarks: (1) Since the financial model for the gas subsector ls now being finalUsed, the

above figures are rough estimates prepared by hand. It is expected, however,

that the difference between the above figures end the figures to be extracted

fram a final version of the model would be ±10.

(2) The gas tariff increase is assumed effective as of July 1, each year.

(3) The gas sales forecast would be the most sensitive factor.

Source: Energy Sector Credit Appraisal Mission.

- 38 -

in government revenues in FY88 and FY89, the analogy just set outindicates that it would be a mistake to therefore ignore the effects ofthese proposals on government accounts.

2.89 Once the targets for retained earnings are achieved, the extrarevenue flowing from the price increases could be split between retainedearnings, dividend increase (government non-tax revenue) and company incometax. However, the possibility that costs may increase as a result of theimproved profit position must be recognized. It was suggested to themission that 'leakages' are commonplace and may increase when profits areincreased, and further that higher profits may generate successful demandsso ensuring that revenue flows directly to the government21 for wageincreases or higher investment. This could be avoided by resorting toexcise tax increases after the self-financing targets are met.

2.90 The Country Economic Memorandum, 1987 has also explored therevenue impact and incidence of eliminating subsidies not justified bydistributional concerns on a sector-by-sector basis.22 The analysisconcentrates on the effect of moving current prices to efficiency pricesand estimates that this would yield revenue equivalent to an additional 2percent of GDP by FY90 with acceptable distributional consequences. Theseefficiency prices are a useful benchmark for public pricing to intermediateusers, are consistent with the principles set out above and should beimplemented. For final users, a premium over such prices would benecessary to reflect the sector's contribution to resource mobilization.

2.91 An integration of the above proposals on a seo.tor-by-sector basiswith the indirect tax recommendations presented in this chapter remains tobe done. This would be desirable for the following reason. In contrastwith the short-term tradeoffs between efficiency and revenue-raisingimposed by the structure of indirect taxation, appropriate public pricingoffers the possibility of simultaneously increasing revenue while improvingefficiency in resource allocation.

3. Other Revenue-Raisin_ Measures

A. Trado Regime

2.92 It has already been mentioned that the government is committed toeliminating the restricted list of imports -- which account for roughly 20percent of all import categories at the four-digit SITC level -- by themiddle of 1989. To the extent that these items enjoy significant scarcitypremia, their free importation under a suitably set CDST schedule wouldraise revenue for the government without necessarily increasing overall

21/ It has been agreed that 80 percent of incremental revenue from changesin gas prices would accrue to the government in FY88, while 20 percentof incremental revenue would so accrue in FY89 and FY90.

22/ Cf. Bangladesh* Promoting Higher Growth and Human Development (WorldBank Report No. 6616-BD. March 10, 1987). The sectors examined arefoodgrains, fertilizer, irrigation, natural gas, power, petroleum,transport, education, health and post offices.

- 39 -

import levels, the latter because the role of controlling import demrndwill be transferred from quantitative restrictions to the pricingmechanism. Reference has been made to existing studies which suggest thatscarcity premia average 35 percent while exhibiting very large fluctuationson an item-by-item basis. However, no estimates were available to themission regarding either the value of importables on the restricted list orthe scarcity premia accruing to licensed importers of those items.23 It issuggested that the reorganized Directorate of Research and Statistics, incollaboration with the proposed Office of the Controller of Customs andExcise Valuation, (for details see chapter 3) collect the aboveinformation. This will ensure that the reform of the trade regimeundertaken by GOB yields revenue within the next year or two bytransferring scarcity premia from licensed importers to the government.The mission does not consider it desirable that tariffs should be "finetuned" in order to reflect scarcity premia on an item-by-item basis;particularly high scarcity premia, when they arise, should be mopped upusing the regulatory duties, as described below. If tariffs are keptwithin the ranges agreed to by the government as part of trade policyreform, the incentives for smuggling will also be reduced, as recentexperience with textiles confirms, and government revenues furtherenhanced.

2.93 It is recognized that the above proposal raises government revenueby removing the subsidy enjoyed by industrial importers of raw materials onthe restricted list or the premium enjoyed by commercial importers. Theextent to which this could be absorbed by profit margins (as in the case ofcigarettes mentioned above) as opposed to being passed on to consumers inthe form of higher prices will depend on the structure of the particularindustry affected by these measures. Such information will be available,as already mentioned above, to the reorganized units in the NBR entrustedwith collecting information on scarcity premia and will serve as a valuableinput into the setting of appropriate CDST schedules.

2.94 The mission has two proposals to make in this area. First, it isrecommended the that whenever large scarcity premia arise in the market --examples in FY87 included corrugated iron sheets and second hand clothing-- that the government use the existing instrument of regulatory dutiesmore extensively to transfer to the government the profits otherwiseaccruing to those who acquire the goods at prices lower than those rulingon the market. Second, it is suggested that combined CDST rates on itemsin excess of 75 percent be reviewed by government to ascertain if lowerrates, by reducing evasion, could raise more revenue as well as provideprotection to domestic industry.

23/ Thus, purely to help illustrate the point, on the twin assumptions that(1) the value of imports on the restricted list is 20 percent of atotal 1984/85 dutiable import figure of Tk 50 billion and (2) thescarcity premium is 10 percent, moving items from the restricted listand imposing an additional import duty of 10 percent should yield Tk 1billion at 1984/85 prices.

- 40

B. Tax Administration

2.95 The mission -has identified several weaknesses in theadministration of indirect taxes in Bangladesh. Chapter 3 is devoted to adetailed discussion of the problems and to specific suggestions forstrengthening and streamlining the administrative structure. While it isdifficult to offer precise estimates of revenue gains, it is expected thatthese measures, when implemented, could yield an additional Tk 1 to 1.5billion per annum at 1984/85 prices.

- 41 -

AMU fAbLe2: Effective at. Of 1E.t DOW an I1S UR bp rAjot

nu"(Ciro" Take)

(1) (3) (2) (4) (3)Se.t Customs Sa" (OW1) O)*l*(2)3

value bam lan Efetiwe UfteetiweItem ~~~~~ ~~~~caustm Wasl

Xt_~~~~~~~~~~~~~~~~~. 0_0

1 Mik 13.67 12.5. 22.5 0.02 Spices23.97 6.7 4.12 26.0 13.53 Tallow 34.6 17.61 10.56 $1.5 20.1* Edible Otis gU.47 46.64 o.0 16.0 0.25 Cocont alL 50.57 7.77 6.37 12.0 13.06 Suar 176.45 12.41 26.20 56.0 0.67 Uers 0.6 0. 77 0.25 2.3 16.2a Omunaotuetd Tobaco L." 0.05 0.42 3.5 20.7e Tobacco Products 0.44 0.09 0.U1 20.s 20.o10 C_mt 132.64 6.02 14.31 s.S 20.31L Coal 16.92 1.04 1.06 5.5 5.412 Coel Ta 2.46 0.6 0.66 21.0 13.713 Pitch and Uitvse 1.22 0.05 0.42 77.0 19.4i4 Petrolem Producte 445.20 20.76 0.53 6.7 0.115 Choi al 160.1 40.31 24.53 30.6 11.716 aPbexcautioae 52.24 6.35 0.12 12.2 0.217 Dyes. Colour. Paints. etc. 45.06 25.07 13.16 55.6 16.$16 Photoaphic d Cimatogropmc 15.26 5.25 2.04 32.7 14.419 Pesticides20 Plestic Materiel. 65.76 36.00 10.53 56.3 10.021 Rubber ad Articles 60.05 35.24 18.5 44.0 14.322 Pulp and Paper 10.87 1.09 0.46 10.0 3.823 Books and Journals 62.87 34.54 19.26 54.0 19.024 Men-Mde Fibres ed yrn 159.68 32.1 27.0 20.1 14.5

25 fabrics - M-tdo Fibres 7.96 8.0 2.66 111.0 17.025 RAw Cotton 271.67 24 0.07 6.6 0.027 Cotton YTrn 72.96 14.77 17.51 20.2 20.028 Cotton Fabrics 2.66 3.50 1.3 l35.0 20.620 Second WrAd Clothing 35.06 lO.63 0.35 54.6 0.630 Ccrmic, Glas ad Glasswae 22.91 2..46 3.34 45.7 10.031 Iran. Steel ad Product. 424.21 165.21 02.71 $3.0 15.732 Metals @thez tha Gold, etc. 131.65 20.25 13.45 15.4 6.033 Cut)ez 22.54 13.67 5.20 60.6 14.634 aecbineay. Apiancee ad Pats 603.7 101.6a 50.7 16.1 4.635 RailW ad Parts 18.36. 2.60 2.9 17.6 15.036 Motor Care ad other Vehcles 141.05 62.2 28.8 43.9 14.137 hAcrat end Partc 1.55 0.24 0.1 15.5 5.636 Sbips. otc,. etc. 111.51 17.43 5.11 1.6 4.039 Others 206.9 0 044 34.57 32.3 6.640 Delo_pnt Surchase 71.66

TOTAL 4452.2 1174.03 4S5.32 26.6 6.1

Source: samalades Fiscal Statistics. Table 15.

1 mre, - 10 mioln

- 42 -

Aneendix Table 2.a: Erfective Rote orf mport Duty nd Sales Toe by FMaor Commodity

Group

1083164

(Cross Taks)

(1) (2) (3) (4) (5)

Import Custom Sale (2)+() (3)+11)+(2))Value Duty Tax Effetiv Effectve

Item Customs SalsDuty Tax

1 milk 89.41 76.03 0.01 *.8 0.02 Spices 12.87 6.16 3.92 47.S 20.63 Tallow 21.64 10.76 6.19 49.7 19.1

4 Edible Oil* 167.82 31.90 1.93 19.1 1.0

* Cacsa" fil 59.66 0.30 5.04 15.7 8.66 Sugar 0.95 0.75 0.21 76.8 12.5

7 Uevezage 0.38 0.63 0.2 165.6 19.6

8 Unimsufactured Tobacco 1.8 0.1 0.39 5.6 20.5

9 Tobacco Products 0.98 1.32 0.3 134.7 13.010 Cemst 106.61 6.08 9.6 5.7 8.5

11 Coal 8.71 0.04 1.23 7.3 13.212 Coal Tar 5.44 1.12 1.31 20.6 20.013 Piteh and litumen 0.87 0.74 0.32 65.1 10.9

14 Petrolewn Products 305.41 22.3 1.32 7.3 0.415 Cboclcalc 133.52 43.18 22.33 32.3 12.616 Pbarmaceuticels 35.58 6.12 0.08 17.2 0.217 Dyes, Colours, Paint, etc. 42.48 24.06 12.5 56.6 16.818 Photographic end Cin>e tographic 9.33 4.34 2 46.5 14.610 Pesticides

20 Plastic Materials 40.96 28.1 14.71 56.2 18.8

21 Rubber *nd Article 51.59 27.56 11.64 53.4 15.022 Pulp and Paper 50.55 35.74 16.06 70.7 18.623 Books and Journals 9.19 0.64 0.34 0.1 3.424 Man-Made Fibros and Yarn 95.76 34.13 17.62 35.6 13.725 Fabrices - Man-Made Fibres 15.85 17.36 4.94 109.5 14.926 Raw Cotton 326.07 31.7 6.11 9.7 1.727 Cotton Yarn 47.52 0.6 10.82 20.6 18.928 Cotton Fabrics 13.25 13.62 5.89 104.3 21.829 Second Band Clothing 17.34 16.36 0.01 94.3 0.030 Cormic, Glas and Glasware 13.67 0.67 2.23 49.5 10.631 Iron. Steel and Products 356.44 132.39 72.63 36.9 14.832 Metals other tban Gold, etc. 72.93 21.2 12.03 29.1 12.833 Cutlery 17.06 11.30 3.84 66.6 13.534 Machinery. Appliances and Parts 664.75 182.33 59.26 27.4 7.035 Railwn and Parts 4.26 0.92 1.37 21.6 26.436 Motor Cars and other Vabicies 64.16 38.906 19.45 46.3 15.837 Aircraft And Parts 0.14 0.2 0.02 14.3 12.538 Ships, Boats, etc. 37.19 6.19 1.49 16.6 3.439 Otherc 309 72.17 27.64 23.4 7.340 Developeant Surch na 53.41

TOTAL 3242.36 901.74 358.23 28.3 6.0

Source: bangladesb Fiscal Statistics. Table 15.

- 43 -

AnD tdix Table 2.3: Effectiv, Roate of Zort Duty nd Sales Toa by Major Comodity Oroup

1982/63

(Core Take)

(1) (2) (3) (4) (5)

Import Cueter Soles (2)+(l) (3)+4(l)}+()j

Value Duty Ta Effective IffectivwItsm Custom Sa

Duty Tax

I Milk 184.23 17.29 6.67 9.4 3.3

a Spices 19.9 9.05 5.67 45.5 19.6

3 Tallow 34.6 2.02 1.17 5.6 3.2

4 Edible OLa 364.2 65.3 2.51 17.9 0.6

5 Coconut Oil 55.38 10.58 9.93 19.1 15.1

6 Sugar 89.36 86 36.6 06.2 20.9

7 Bvwra-go 0.85 1.5 0.45 176.5 19.1

8 Unranutactured Tobacco 0.47 0.01 0.1 2.1 20.6

9 Tobecco Products 0.51 0.11 0.13 21.6 21.0

10 C e t 172.56 27.39 3.09 15.9 1.5

11 Coal 19.7 2.17 0.04 11.0 0.2

12 Coal Tar 6.96 1.13 1.06 16.2 13.1

13 Pitch end Bituen 0.17 0.2 0.08 117.6 21.6

14 Petroleum Products 605.83 41.06 0.58 6.8 0.1

15 Chemicals 196.48 59.76 29.83 30.4 11.6

16 Pharmaceuticals 55.76 9.74 0.56 17.5 0.917 Dyes. Colours. Paints. etc. 49.89 27.16 15.18 54.4 19.7

l6 Photographic and Cinematosraphic 17.61 6.13 3.54 34.8 14.9

19 Pesticides 26.06 0.14 0.0 0.3

20 Plastic Materials 78.87 37.01 19.85 46.9 17.1

21 Rubber nd Articles 79.43 26.62 13.81 36.0 12.8

22 Pulp mnd Peper 58.4 42.94 19.89 73.5 19.6

23 Books and Journals 19.85 1.73 0.8 8.7 3.7

24 Man-Made Fibres and Yarn 113.3 29.42 30.64 26.0 21.5

25 Fabrics - Man-Made Fibres 1.57 1.31 0.42 83.4 14.6

26 Raw Cotton l54.93 18.1 0.72 11.7 0.4

27 Cotton Yarn 61.18 17.4 15.97 28.4 20.3

28 Cotton Fabrics 0.53 0.61 0.21 115.1 18.4

29 Second Bend Clothing 30.65 19.86 0 64.9 0.0

30 Ceramic Glass and Glassware 30.48 18.9 5.64 62.0 11.8

31 Iron, Stool and Products 445.12 179.04 81.56 *0.2 13.1

32 Mbtels other then Gold, etc. 106.95 21.31 13.47 19.9 10.5

33 Cutlery 27.46 19.08 7.03 69.5 15.1

i4 Machinery, Appliances end Parts 771.33 192.27 56.01 24.9 6.0

35 Railway end Partn 23.46 4.81 2.95 20.5 10.4

36 Motor Care end other Vehicles 189.05 73.82 27.67 39.0 10.5

37 Aircratt nd Parts 0.73 0.02 0 2.7 0.0

38 Shis ,Soots, etc. 121.81 16.66 6.23 13.7 4.5

39 Others 398.22 137.47 49.96 34.5 9.3

40 Development Surch"no 108.27

TOTAL 4613.68 1335.41 472.3 28.9 7.9

Source: Bnsladesh Fiscal Statistica, Table 15.

1 cror. - 10 million

- 44 -

APPENDIX 2.1

The Total Tax Element in Price

The concept of total tax on a sector introduced in Section III andTable 2.5 answers the following question: What would be the increase ingovernment revenue as a result of a unit increase in the final demand forthat sector? To see this, let

x: gross output by sector

y: final demand by sector

Thus, since gross output equals the sum of intermediate and final demand ina closed economy,

x- Ax + y (A.1)

where A is the input-output matrix.

whence

x - (I - A)-1 y (A.2)

Let

te: effective tax on gross output

Then

tex - te(I - A)-1 y (A.3)

so that. te(I -A)1 may be regarded as the tax on final demand. This isdefined as the total cax in a closed economy.

The argument may be modified in an open economy as follows. LetAd denote the domestic input-output matrix, and Am denote the matrix ofimported inputs required per unit of domestic goods. (Notice that, on thisview, imported inputs are assumed to be noncompetitive with domesticoutput). Since the tax on gross output is now the sum of domestic taxes,td, as well as import taxes weighted by the proportion of imports inproduction, equation (A.3) becomes

(td + tmAm)x _ (td + tmAm) (I - Ad)-1 y (A.4)

Hence the total tax is (td+tmAm) (I-Ad)-l, the two components of which arereported in Table 2.5 as (i) total CDST on intermediates, tmAm(I-Ad)-l.(column 1 of Table 2.8) and (ii) the total excise on intermediates,td(I-Ad)*1 (column 2 of Table 2.8).

- 45 -

This calculation embodies certain restrictive assumptions whichare explained in the references cited in footnote 8 of Chapter 2. Themethod is nevertheless able to identify sectors which are relatively moreheavily hit by the taxation of intermediate goods. Its restrictiveassumptions do not, however, make it an appropriate vehicle for revenueestimation. The framework developed for revenue estimation is thereforequite different, as explained in Chapter 4.

- 46 -

APPENDIX 2.2

An Illustration of a VAT

A general formulation of the VAT is shown in Table 1.l Theinteractions between three industry 'types', households and foreigners(imports and exports) are shown, with sales of each along the rows andpurchases in the columns. In the case where all industries are taxable netrevenue is shown to be equivalent to taxes on goods purchased by households(whether the source is domestic or foreign). Exports are zero-rated, whichimplies that full credits on account of tax inputs are allowed toexporters.

Table 1: A Value-Added Tax Framework*Purchases

Sales Tndustry 1 Industry 2 Industry 3 Households Foreigners(exports)

Industry 1 0 S12 S13 SlH SlEIndustry 2 S21 0 S23 S2H S2EIndustry 3 S31 S32 0 S3H S3EForeigners S1i SI2 SI3 SIH 0(imports)

* Sij -sales by i to j i,j - 1, 2, 3 (industries).I - imports, E - exports, H - households

All 7 taxable transactions are subject to the same tax, t, except exports.which are zero rated.

Tax collections are as follows:

If all industries are taxable:

From industry 1 : t[(S12 + S13 + SlH) - (021 + S31 + SI)]

From industry 2 : tl(S21 + S23 + S2H) - (S2 + S3 2 + SID)

From industry 3 : tK(S31 + E32 + S3H) - (S13 + S23 + Si3)]

On imports : t(SIl + SI2 + SI3 + SIH)

Net revenue - t(SlH + S2H + S3H + SIH)

1/ See Balladur , J. - P. and A. Coutiere, 'France", in H.J. Aaron (ed)The Value Added Tax: Lessons from Euroge, (Washington, D.C.: BrookingsInstitution, 1981).

- 47 -

If industry 3 is exempt:

From industry l : W(Si2 + S13 + SlH) - (S21 + SIl)

From industry 2 : t[(S21 + S23 + S2) - (S12 + SI2)

On imports : t(Sll + S12 + SI3 + SIH)

Net revenue - t(SlH + S2H l SIH + S13 + S23 + S13)

The difference in revenue attributable to the exemption is:

t(S13 + S 2 3 + S13 - S3H)

This framework can be generalized to any number of rates and to any numberof industries. In that event, revenue equals (Sjj) t - t' (Sij), where(Sij) is an n + 1 dimensional matrix of sales by industry j; t' is a coLumnvector of the tax applied to industry j; t' is the transpose. If anindustry produces different products subject to different tax rates, eachtax rate group must be treated as a different "industry'.

In the second case, Industry 3 (which liay be compared with theagricultural or small-scale sectors) is exempt from VAT. This means thatalthough output is not taxed, no credit is allowed for the taxation ofinputs. Moreover, exempt firms do not need to register with the VATadministration. Zero-rating, on the other hand, allows a firm to reclaimtaxes paid on inputs (with no tax on output). Note that zero-ratingrequires registration for credits to be allowed. It may therefore bepreferable to exempt sectors, such as agriculture, rather than impose azero-rate VAT on crops and livestock, as this would avoid an excessiveadministrative burden. It may also be seen that if the output of Industry3 were to be taxed at a low rate (on distributional grounds say) whereasits inputs were to be taxed at a higher rate, then payment may flow fromthe revenue authorities to the sector rather than vicg versa. Thusexemption may well be the preferred treatment for 'hard to tax' sectorssuch as agriculture and particular types of services, such as financialactivities and professions. Note that there will be an element of tax onthe output of such sectors through taxes paid on their inputs.

- 48 -

APPEND 2.3

"Deemed-to-Have Paid" Provisions for Market Purchases Under the VAT

The Modvat scheme in India envisages that credit of excise duty oninputs will be given when accompanied by supporting documentationindicating payment of duty on such inputs. This presupposes that themanufacturer taking such credit should ordinarily obtain inputs only fromthe manufacturer of those inputs who alone can supply the relevantdocumentation. During 1986 and 1987, when the coverage of Modvat wasextended to goods falling under a majority of Chapters in the Excise Tariffin India, it became clear, however, that not all manufacturers could buytheir inputs solely from manufacturers of those inputs. Inputs werepurchased from stockists, wholesalers and in some cases even fromretailers, who could not furnish excise documents as evidence of payment ofduty. This was particularly so in the case of units in the small scalesector.

The above problem was foreseen even in the context of the earlierproforma credit scheme which was introduced in the central exciseadministration in 1962. Accordingly, there are enabling provisions in thelaw relating to the earlier scheme of proforma credit as well as in the lawrelating to Modvat, allowing the government to direct that with effect froma specified date all stocks of exciseable goods in the country, exce;tstocks lying in a factory, customs area or a warehouse as are clearlyrecognizable as being non-duty paid, may be deemed to be duty paid. Creditof duty in respect of such goods may be allowed at such rates and subjectto such conditions as the government may direct, without production ofdocuments showing payment of duty. Such directions have been issued underModvat provisions in respect of iron, steel and specified articles thereof;unwrought copper, unwrought aluminium, unwrought lead and zinc. Further,the government has issued notifications from time to time in respect ofparticular commodities providing that the market stocks of those goods willbe deemed to have discharged duty burden to the extent indicated in therelevant notification. However, by and large, such deeming provisions havebeen confined to ferrous and non-ferrous metals. There are obviousdifficulties in treating all market stocks as having been subject to aparticular level of excise duty with a view to enabling purchasers to takecredit of such duty in the absence of supporting documents.

Hasell 002 AM 2.3: Mitra:3-30-88:pp

- 49 -

Chapter 3: INDIRECT TAXATION: ADMINISTRATION

I. INTRODUCTION

1. Backgroun

3.1 Reference has already been made in Chapter 1 to the view thatsubstantial net gains in revenue could be realized by strengthening taxadministration without necessarily changing existing tax rates. Someperspective on the magnitude of this problem is provided by the observatiouthat arrears of different taxes and duties stood at Tk 6615 million as ofJune 30, 1986 or roughly 20 percent of estimated annual collections. Table3.1 shows that this proportion has remained virtually constant over thelast few years.1

Table 3.1: Arrears of CDST, Excise and Income Taxes(millions of Taka)

(5)(1) (2) (3) (4)-(l)+(2)+(3) Tax

Year CDST Excise Income Total Arrears Revenue

1981/82 1,278.0 803.5 3,513.0 5,594.5 19,7901982/83 1,311.1 764.6 3,316.1 5,391.8 21,3501983/84 1,491.6 721.7 3,753.9 5,967.2 23,7201984/85 1,834.1 694.2 3,073.6 5,601.6 29,2701985/86 2,054.5 1,237.0 3,324.0 6,615.5 32,680

Source: National Board of Revenue.

3.2 The National Board of Revenue is responsible for theadministration of (a) customs duty on imports and exports, sales tax,regulatory duty, and development surcharge on imports; (b) excise duties ongoods manufactured in Bangladesh and on narcotics and liquor and turnovertax on specified goods and services; and (c) direct taxes including incometaxes on persons and companies. The overwhelming importance of those taxesin public revenue, together with widespread concerns, explicitlyacknowledged in the FY87 budget speech, about smuggling and othercompliance-reducing practices, emphasizes the central importance ofadministrative procedures in the NBR. Accordingly, the primary objectiveof this chapter is to propose reforms in administrative procedurespertaining to indirect taxation which, in the mission's view, are essentialfor the operation of a reformed tax system. A more specific objective,viz., that of describing measures that are specifically designed to phasein a noncascading system of taxation at the manufacturers' level, has

1/ This table is further analyzed in paragraph 7.21 and Tables 7.9 - 7.11of this report.

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already been covered in Section IV of Chapter 2 to which the reader isreferred for a detailed discussion.2

2. Existing Organization

3.3 The infrastructural arrangements for handling indirect taxadministration consist of (a) the National Board of Revenue, (b) certainauxiliary organizations, viz., (i) the Directorate of Customs Intelligence& Investigation; (ii) the Directorate of Inspection, Training andDrawbacks; and (iii) the Controller of Customs Valuation; and (c) field-level organizations comprising Collectorates of Customs and Excise andtheir subsidiary units such as the divisions and circles; and (d)Collectors (Appeals), Dhaka and Chittagong.

A. National Board of Revenue

3.4 An organization chart of the NBR, laying special emphasis on theindirect tax side, appears as Figure 3.1. The organization is headed bythe Chairman, whe also holds the position of Secretary, Internal ResourcesDivision, Minis y of Finance. Five members of the rank of AdditionalSecretary reporL to him. Of them, three have responsibilities for indirecttaxes and oversee (1) customs (2) excise and (3) customs appeals. Theremaining two are concerned with direct taxation. In turn, the members areserved by First and Second Secretaries and staff who report to them.

3.5 The organization chart further shows that the NBR has three wingscorresponding to (1) Customs and Excise, (2) (Direct) Taxes and (3)Administration. Each wing is divided into a number of sections: nine andfive in customs and excise respectively, six in direct taxes and eleven inadministration. The sections are headed by second secretaries, groups ofwhom report to first secretaries. The latter, in turn, are accountable tothe members of the NBR. In addition, there is the Directorate of Researchand Statistics which serves the members for customs and excise as well asdirect taxes and the Manual cell which reports to the member in charge ofappeals.

B. Auxiliarv Organizations

3.6 The auxiliary organization of the NBR comprise the Directorates ofInspection, Training and Drawbacks, the Directorate of Customs Intelligenceand Investigation, and the Controller of Customs Valuation.

3.7 The Directorate of Inspection, Training and Drawbacks isresponsible for formulating policies, plans and programs relating totraining of customs and excise officers and other staff. It is alsoresponsible for conducting comprehensive surveys and investigation ofindustrial units for purposes of fixing export rebates and drawbacks.

3.8 The Directorate of Customs Intelligence and Investigation carriesout intelligence, surveillance operations and investigations in order toenforce customs, excise, narcotics and liquor Laws.

2/ Aspects of indirect tax administration have been explored by the UnitedNations under project number BGD/86/011/A/Ol/Ol which also proposestechnical assistance in the area of customs and excise administration.

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Present Orgnisation of the National Board of Revenue (NMM)tInternal Resources Divisotn. Minstry of Finance)

Chairman (NMR)[Secretary MID)

INDIRECT TAXES WIN G DIRECT TAXES WING

Mmber em4ber (Tarex I) Meb (Taxes 11)(Custen-) (Excise) Appeals

_ , *~~nd ** *Revisions

First FirstSec:etaries 3 Secretaries 2

Seccnd 6Secretaries Sccrctarie

I.

SectioncSeins 5 G

Administration

Administration (Customas Excise Services) NIR Eeadqarters Admin. (Direct T_zes Services)First Secretery First Secretary

First Secretary Administration III I A hdministration IAdministration I 1

Second SeCretarJ Second SecretaryX ~~~~~~~~~~~~~AaUetMrastion III 3 adcinistrattonrSecond Secretary AdinstNUAa CiLL I

Adinistrstion 3- l I I Sctioms Admin rrirI S 3r Sections

Collector - I- I Pt~~~~~incipol

Sections 3 applrCzec - ISuperintendent - 1aux. Staff 5

DIORECTORaTE OF asvRcs aND STJATSStS =1

AS" ~ ~ ~ ; DSRECTCR ;R 1

Numbers shown against boxes indicate the number of posts sanctioned.

** There is a comparable structure on the direct taxes side. Details are notprovided here.

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3.9 The functions of the Office of the Controller of Customs Valuationare to examine documents and acquire information from various organizationsinside and outside the country to ensure that all imports and exports arevalued correctly and consistently.

C. Field-Level Or2anizations

3.10 The field-level organizations responsible for customs and exciseadministration are the Custom Houses and Collectorate of Excise. There arefive executive collectorates: two Collectorates of Customs, one atChittagong and the other at Dhaka; and three Collectorates of Excise andCustoms at Dhaka, Chittagong and Khulna. Of these, the overwhelmingmajority of government revenue is collected by the Custom House,Chittagong. In addition, there are two Collectorates cf Appeal, one atDhaka and another at Chittagong.

3. The Recommendations in Outline

A. Motivation

3.11 The mission is of the view that, while the broad outlines of theabove structure are appropriate, considerable reorganization andstrengthening of its constituent parts are necessary to meet the demands ofa tax system capable of serving longer term development objectives.Thus, while there has been considerable growth in indirect tax revenues,the administrative organization itself has not enjoyed commensurate growth.There has been little reorganization of the office of the NBR to enable itto cope with the growing volume and variety of work. Similarly, while theDirectorates have considerable achievements to their credit, there is needfor their strengthening and reorganization in the light of changingcircumstances. The field-level Collectorates require not only streamliningbut substantial augmentation as well.

3.12 The mission has identified weaknesses in the areas of informationmanagement for policy formulation, training and personnel matters, anti-smuggling and anti-evasion activities, customs and excise valuation,revenue accounting and internal organizational procedures of the indirecttax administration. It therefore proposes a comprehensive and wide-rangingpackage of reforms that calls for changes at all levels: (1) at NBRheadquarters, (2) in the auxiliary organizations and (3) throughout thefield-level collectorates. These will be seen to require a combination ofstrengthening of existing units and reorganization into new units. Whilethe adoption of these measures will have salutary consequences for revenueand efficiency, their attractiveness would be further enhanced if they didnot involve major new expenditures for the COB. For this reason, themission suggests areas where economies are possible via reorganization andmerger of existing units. Finally, it will be seen that therecommendations in all cases build on administrative structures that arealready in place in Bangladesh.

B. National Board of Revenue

3.13 The first set of recommendations call for strengthening of the NBRat the apex level, the reorganization of the Directorate of Research andStatistics and redistribution and rationalization of work among existingsections of the NBR.

53 -

C. Auxiilarw Orenizations

3.14 The second calls for splitting the Directorate of Inspection,Trainin8 and Drawback into three units: (1) the Directorate of Trainingwhich would oversee all training programs and issues of cadre management;(2) the Directorate of Inspection, Organization and Methods, Audit, Manualand Publications which would discharge the various important functionsincluded in its title; and (3) the Directorate of Drawbacks, Manufacture-in-bond and Rebates, which will play a key role in strengthening andextending duty drawback and crediting procedures as part of a move towardsa noncascading system of taxation at the manufacturers' level. It is alsosuggested that important matters such as anti-smuggling, anti-evasion, andcorrect valuation of transactions subject to CDST and excise duties beperformed in a coordinated fashion under the aegis of a Directorate-Generalof Revenue Intelligence, Investigations and Operations, Valuation (Customsand Excise), Narcotics and Liquor. The Revenue Intelligence,Investigations and Operations Wing weuld include the existing Directorateof Customs Intelligence and Investigation. The Valuation (Customs andExcise) Wing would be formed from the existing office of the Controller ofCustoms Valuation. Similarly, the Narcotics and Liquor Wing would becreated from the office currently bearing the same title. In all cases,the mission proposes specific ways in which those constituent organizationswould be made more effective.

D. Field-Level OrgUnizations

3.15 The third set of recommendations looks at improvements in theworking of the field-level collectorates. Suggestions are made on thecomposition of basic working level units in the Chittagong Custom House andprocedures detailed for improving efficiency in the Dhaka Custom House aswell as the other Collectorates of Customs and Excise. Significantrationalization is also proposed regarding the two Collectorates (Appeals).It is also recommended that anti-smuggling operations be strengthened byestablishing three field-level Collectorates (Preventive and Intelligence)at Dhaka, Chittagong and at a suitable location on the Bangladesh-Indiaborder.

E. Miscellaneous

3.16 A final set of recommendations is concerned with (1) theintroduction of an efficient system of revenue accounting, (2)computerization in the executive collectorates as well as in theDirectorate of Research and Statistics and (3) the adoption of theHarmonized System of Nomenclature (HSN) for both customs and excisetariffs.

II. THE NATIONAL BOARD QF REVENUE

1. AMe LeAv

3.17 The detailed distribution of responsibilities of the three membersin charge of customs and excise matters is as follows. Member (Cu_toms andAdministration) looks after (i) administration of the Board's office, (ii)personnel administration of the officers of customs and excise of and above

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the rank of Assistant-Collector; (iii) personnel administration of theofficers below the rank of Assistant-Collector and the non-personneladminlstrative and technical work of the Custom Houses of Chittagong, andDhaka and Chalna (the latter belonging to the Collectorate of Customs andExcise, Khulna), the Directorate of Customs Intelligence and Investigationand the Department of Customs Valuation; (iv) matters pertaining to dutyexemption, repayment and drawback; and (v) Customs & Excise establishmentwork of the NBR's headquarters. He also exercises powers of review underSection 195 of the Customs Act, 1969.

3.18 Member (Excise) deals with the (i) personnel administration ofofficers and staff below the rank of Assistant Collector and non-personneladministrative and technical matters of the Collectorates of Customs andExcise at Dhaka, Chittagong and Khulna (excluding Chalna Custom House); and(ii) all personnel and non-personnel matters of the Department of Narcoticsand liquor. He also exercises powers of review under Section 35.A of theExcises and Salt Act, 1944.

3.19 Member (Appeals and Revision) decides appeals lodged againstorders of Collectors of Customs and Excise, and revision of cases againstorders in appeal passed by Collectors (Appeals). He is also in charge ofmatters relating to the Directorate of Inspection and Training (Customs andExcise), and the Manual cell at the NBR.

3.20 The above paragraphs describe the functions of the members in theindirect taxes wing of the NBR. The mission believes that the workload onthe members is far too onerous with the inevitable consequence thatimportant organizational matters described in further detail throughoutthis chapter receive inadequate attention. These include problems ofsmuggling, valuation, evasion and avoidance; weaknesses in recruitment,cadre management and training, and inadequacies in data compilation,storage and analysis.

2. Recommendations

3.21 The mission therefore recommends that the indirect taxes wing ofthe NBR should consist of five members instead of the existing three.There should be a new member (Taxation planning, research and budget) and aseparate member (Administration) looking after recruitment, cadremanagement, training and reorientation, postings and transfers. All reviewwork either under Section 195 of the Customs Act, 1969 or under Section35.A of the Excises and Salt Act, 1944 should rest with Member (Appeals andRevision). This would relieve the extreme pressure under which Member(Customs and Administration) and Member (Excise) currently operate and givethem the opportunity to address a number of the weaknesses in indirect taxadministration identified in the following sections of this chapter.Member (Customs and Administration) would then be able to devote moreserious attention to (i) building up the Directorate of CustomsIntelligence and Investigation and the offices of Customs and ExciseValuation, (ii) ensuring effective working-level coordination between anti-smuggling, intelligence and investigation organizations, the Collectors ofCustoms, the state police, and other paramilitary organizations; (iii)strengthening drawba k and repayment mechanisms, manufacture-in-bond forexports, and export processing zones; (iv) streamlining systems andprocedures in the Custom Houses; and (v) monitoring customs revenue

55 -

collections on a regular basis. In much the same way, the recommendationswill allow Member (Excise) to devote required attention to problems ofevasion of excise duties, procedural studies and simplification, monitoringof excise duty collections and revenue accounting and reconciliation. Itis suggested that this change be implemented within a one-year period.3

Both members would have more time to visit field offices for inspection,with positive effects on the efficiency of the latter. Under the proposedsystem, Member (Appeals and Revision) would oversee all appeals andrevisions, including review work presently looked after by Member (Customsand Administration) and Member (Excise). This will relieve the latter oftheir responsibilities regarding revision. Supervision of the Directorateof Inspection and Training should be the responsibility of the new Member(Administration) although it may have to report to other Members as well.The mission believes that the NBR will be considerably strengthened byaddition of the suggested two members. It is suggested that this change beimplemented within a one-year period.4

3. The Directorate of Research and Statistics

3.22 The Directorate of Research & Statistics is headed by a Directorwho is assisted by a Deputy Director and a few Assistant Directors. TheDirectorate is responsible for statistical information relating tocollection of various duties and taxes, imports and exports and otherrelated data.

Existing Functions

() Statistics

3.23 A list of tax reports received in the customs and excise branchesof the Directorate is at Appendix I. It receives more than sixty returnsof which nearly thirty returns relate to customs and excise duties andsales tax. Most of the returns are monthly, barring a few which are dailyor fortnightly. Whereas the number of reports and returns is large,information very often required for decision making is not readilyavailable. There are broadly two reasons for this. First, informationcontained in several returns does not get compiled for lack of adequate manpower in the Directorate. Second, the reports concentrate heavily onrevenue collections. While this allows for monitoring of revenue, it leadsto large gaps in the data reporting system which hampers decisionmaking.Some examples follow. The returns do not provide any information on suchmatters as the number of excise documents, the number of excise assesseesbroken down by commodity, or the number paying turnover tax, and theclassification of the assessees based on their location in the organizedand small scale sectors. There is no information on the amount of dutyforegone as a result of several exemptions in the customs and exciselegislation.

3/ Ways in which the auxiliary organizations and field-level collectoratesshould be correspondingly reorganized to strengthen these functions arediscussed in detail below.

4/ Since the first draft of this report was prepared, the NBR has added anft'1rA "W 'ler (Administration and Development).

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(ii) .i

3.24 The Directorate of Research and Statistics is not currentlyequipped to do the kind of research that can serve as an input into theformulation of the annual budget.

4. Recommendations

Structure

3.25 The mission believes that administration of a rational tax policyrequires that the Directorate of Research & Statistics be reorganized andstrengthened. It is suggested that the Directorate should have separateresearch branches for the customs and excise wing on the one hand and the(direct) taxes wings on the other and that a similar separation obtain onthe statistical side. The research and statistical branches in the area ofcustoms and excise could be under a Director, assisted by a Deputy Directorand Assistant Directors.

Statistical Branch

3.26 The statistical branch on the customs and excise side should havea computerized data base which could be utilized to provide information fordecision making in the area of duties and taxes. This showxld make itpossible to use the large number of returns on the customs and bxcise sidethat are currently not utilized for want of manpower, and to compile allrelevant data relating to customs and excise duties, sales taxes and otherindirect taxes.5

3.27 At the same time, it is essential that a critical review be madeof all the report: received by the Directorate so as to ensure that theinformation contained lends itself to computerization. Whereas some newreturns may have to be introduced, as suggested by the earlier discussion,there are some which could be dispensed with. Fortnightly returns could beremoved. On the excise side, compilation of detailed information could beconfined to major revenue-yielding items, and information in respect ofother commodities combined. Returns should contain the production andclearance of important excisable commodities, record the number and scaleof units and identify whether the latter are in the organized or in thesmall scale sector. Information should be collected regarding the licensedand installed capacities of units manufacturing important excisable goods,or paying turnover tax. This will allow the Directorate to developprofiles of important commodities and permit well-informed decisionsregarding the level of taxation and required fiscal incentives. TheDirectorate should also gather information regarding assessable values andwholesale and retail prices of important commodities and in doing so liaisewith the Office of the Controller of Customs Valuation. It should maintaincomplete information regarding arrears of revenue to enable the NBR to takesuitable remedial action.

5/ Computerization in the statistical branches of the field officessupplying the data is discussed in paragraphs 3.95-3.102 below.

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Research BraIch

3.28 It is envisaged that all analytical work relating to customsduties, sales tax and excise taxes, regulatory duty and developmentsurcharge on imports, regulatory duty of excise and turnover tax onspecified goods and services, exemptions from these duties and taxes andformulation of the annual budget proposals would be handled by the researchwing of the Directorate. The data base in the statistical wing would beused by the research wing to (a) monitor revenue collections at macro andmicro levels periodically; (b) to assess the impact of exemptions fromduties provided for several commodities, and to examine cases for freshexemptions, where necessary; and (c) to undertake taxation studies relevantto fiscal, trade and industrial policy in close consultation with otheragencies of the government; and (d) to undertake all preparatory work ontaxation proposals for the annual budget.

3.29 The mission believes that the development of in-house capabilityin these areas is essential for improving the quality of policy-making intaxation and, more generally, in fiscal matters. The importance of suchexpertise will increase as the Directorate is expected to play a key rolein ascertaining the way in which excise taxes must be adjusted 2ari p.assuwith the extension of crediting and duty drawback procedures alreadydiscussed in Chapter 2. To help institutionalize the importance of thesefunctions, the mission recommends that the reorganized Directorate ofResearch and Statistics report to the newly created Member (TaxationPlanning, Research and Budget).

Staffin_

3.30 The staff strength of the Directorate could be enhanced bydiversion of one post of First Secretary and two posts of SecondSecretaries along with their auxiliary staff from one of the customs andone of the excise sections in the NBR. This complement could constitutethe research wing of the Directorate. The First Secretary could alsosupervise the work of the statistical wing. There are already one DeputyDirector and two Assistant Directors on the customs and excise side of theDirectorate. They cou'.d constitute the nucleus of the statistical branch.The present post of Director could be left exclusively in charge of staffof the (direct) taxes side of the Directorate of Research and Statistics.A chart of the proposed Directorate appears in Appendix II.

3.31 The reorganization of the Directorate should be undertaken over aone-to-three year period.

5. Other Vinas of the NBR: Recog_mndtions

3.32 The division of the different wings of the NBR into sections hasalready been mentioned above. The mission would suggest thatresponsibilities in the customs and excise wing of the NBR be distributedin a way that does not require each section to do a dissimilar assortmentof tasks. The Directorate of Research and Statistics should handle alltariff work, taxation studies, exemptions and manual budget proposals.Another section could be exclusively entrusted with work relating to anti-smuggling operations such as disposal of seized and confiscated goods,rewards; compilation of all-Bangladesh statistics of raids, searches, and

. 58 -

seizures, arrests and prosecutions which are currently unavailable andliaison with the corresponding field organizations. Similarly this sectioncould handle all infrastructural requirements of the revenue intelligenceand investigation organization in the Collectorates of Customs and Exciseand in the Directorate-General of Revenue Intelligence and Investigationsproposed by the mission. The rest of the sections could handle allprocedural and other residual functions. These suggestions of the missionwould not require any major extra staff and could be achieved mostly byreorganization of the existing structure. They should be implementedwithin one year.

III. AUXILIARY ORGANIZATIONS

1. Inspection. Training and Drawback

A. Cadre Management. Personnel and Traiinna Policy

3.33 Significant portions of NBR headquarters and the fieldorganizations currently suffer from large scale vacancies, especially inthe Class I cadre. It will be seen that there are units where actualworking strength is as low as 50 percent of sanctioned strength. Themission was given to understand that this was because entrance examinationsfor Class I services such as that of Customs and Excise have been few andfar between and that recruitment has been limited. It is important toemphasize that without regular recruitment to the Class I cadre to redressthe problem of availability, it will not be possible to strengthen taxadministration in line with the requirements of a growing economy.

3.34 Effective cadre management requires very careful and realisticassessment of manpower requirements over a period of time in variouscadres. It calls for a systematic program of training and refreshercourses both within and outside Bangladesh. It also involves provision ofadequate opportunities for promotion for all cadres, as well as effectiveutilization of available resources. This implies cutting out redundantpositions in some overstaffed organizations so that they can be utilized toaugment areas of administration which need adequate manpower supportwithout calling for substantial expenditures. The importance of thesematters would be suitably recognized if, as recommended above, the NBR weretro have a member exclusively in charge of cadre and personnel management,administration and training.

3.35 Responsibility for training rests under the current system withthe Directorate of Inspection, Training and Drawback. The mission is ofthe view that the Directorate should be split into three separateDirectorates corresponding to its three functions and each of them placedunder a Director at the level of Collector. This is to ensure that each ofthose functions receives the attention that is clearly required to create aviable tax administration. The mission's recommendation regarding theproposed Directorates of Training is presented immediately below. Theorganization of the other two Directorates is presented later.

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B. Directorate of Trainina

3.36 The Directorate on the training side is responsible for (i)formulating policies, plans and programs of basic training of AssistantCollectors, Appraisers, Preventive Officers of Customs, Inspectors andsepoys in both customs and excise; and (ii) organizing refresher coursesfor all categories of officers and staff of the Customs and ExciseDepartments. The Directorate is also responsible for proper implementationof the training programs of both basic and refresher courses in the Customsand Excise Training Academy at Pahartali, Chittagong. The Academy isheaded by an Additional Director who is designated the Principal. He isassisted by one Joint Director and three Deputy Assistant Directors. TheAcademy wing of the Directorate has a total sanctioned strength of 80officers and staff in various categories. The mission was informed thatthe working strength, even at critical levels, is less than half thesanctioned strength. This makes it barely possible to discharge itsassigned functions and responsibilities.

3.37 To that end the mission recommends that the Academy be upgradedinto a full fledged Directorate. Such a measure would not involve anysubstantial expenditure. The Academy has an overall sanctioned strength of80. Considerable economies can be effected by cutting out redundant staffso that additional staff at critical levels can be provided. The Directorof the Academy should be an officer of the level of Collector. He shouldbe assisted by a staff assured of regularity of tenure and drawn from alllevels of the customs and excise service. The staff would offer short-termprograms and seminars for in-service staff and long-term courses for newentrants. The mission takes the view that the proposed Directorate ofTraining should be forged into an effective instrument for training andcadre management that is responsive to the broad range of functionsperformed by customs and excise officials.6 The Director of Trainingshould participate in the selection and promotion and posting of officers.An outline of the proposed Directorate of Training is presented as AppendixIII. It would report to the newly created Member (Administration).

3.38 The mission also considers it necessary for the Collectors ofCustoms and Excise to create training facilities within each executiveCollectorate with the assistance of senior officials of the Collectorateand the Directorate of Training in the matter of course content, design andguest faculty. The Collectors should also organize spot trainingfacilities such as at the airports for clearance of passengers, and in thefield whenever there are major changes in laws and procedures.

3.39 The creation of this Directorate should occur within one year.

6/ By way of example, paragraph 3.59 below recommends that the Directoratetrain selected officials from the Directorate of Customs Intelligenceand Investigation in prosecuting offenders in courts of law.

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C. Directorate of Inspection. Organization & Methods. Audit. Manual &

(i) Inaoection

3.40 The present Directorate of Inspection (i) inspects the Offices ofCollectors of Customs and Excise, their Divisional and Circle Offices andother Customs and Excise units; (ii) examines and reviews inspectionreports of supervisory officers and undertakes follow-up actior on therecommendations and suggestions of the inspecting officers; (iii) conductspromotion and confirmation examinations for the officers and other staff ofthe department; (iv) performs the functions of an organization and methodsbody examining the staff requirements of the various collectorates andother organizations under the NBR; (v) advises the NBR on questions of lawand administration; and (vi) performs such other functions as the NBR maychoose to assign. Although the Directorate at present has a sanctionedstrength of 21 personnel, barely half of those positions are currentlyoccupied. For that reason, the Directorate finds it extremely difficult todischarge its assigned functions. The mission therefore recommends thatthe vacant positions be filled and its total strength be suitably augmentedto carry out the following range of tasks.

(ii) Organization and Methods (O and M)

3.41 It is the mission's impression that the NBR currently has noviable organization capable of undertaking systems studies and internalaudit functions on a regular basis. With increasing emphasis onsimplification, streamlining and reduction of systems, procedures anddocumentation, especially in the light of proposed computerization, theabsence of a regular organization to conduct these tasks is a seriousshortcoming.

3.42 The mission therefore suggests that the Directorate of Inspectionshould also become the Organization and Methods wing of the NBR. This isbecause implementation of inspection work and systems studies can eachcomplement the other. The augmented Directorate could for instance studyways of reducing stages in the matter of clearance of import and exportcargo, including air cargo and recommend a more modern system of baggageclearance with greater emphasis on speed, simplicity and convenience. Thiswould also become important from the point of view of computerization. Itcould examine weaknesses in the existing system for collection of customsand excise duties and suggest improvements emphasizing simplicity, speedand security against fraud. The Directorate could undertake a review ofthe self-clearance procedure for excisable goods which was introduced fromJanuary 1, 1985. It could profitably study the existing system of revenuecollection, reconciliation and accounting and suggest ways of improvement.It could study how collection procedures could be improved and mechanizedat the time of processing of documents relating to impor_.s and exports andthose relating to clearance of excisable goods. It could also study howinformation regarding value, classification and other details could becomputerized from the basic customs and excise documents with a view toready retrieval for speedy and accurate assessment to duty. It could carry

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out a systematic study of staffing patterns to see where staff has becomeredundant and ill-equipped to handle intricate tariff and proceduralmatters and suggest economies wherever possible and augmentation wherenecessary. It could constantly review the existing layout of customs andexcise field formations and suggest reformation when required in the lightof the develnping industrial base and attendant malpractices. Finally,the 0 and M wing would be the natural unit which would study procedures andsystems appropriate to the proposed computerization of customs and exciseadministration, a recommendation made later in this chapter.

(iii) Audit

3.43 It is the mission's impression that arrangements for internalaudit of assessment and clearance documents both on the customs and exciseside are quite inadequate. With the introduction of the self-clearanceprocedure in respect of excisable goods, the need for effective internalaudit cannot be overemphasized. The audit cootrol is yet to proveeffective and therefore has to be strengthened. IL; the Custom House atChittagong, internal audit is one of the responsibilities of a DeputyCollector, who is also in charge of the Establishment and Administrationbranch of the Custom House. The internal audit organization in the CustomHouses and Excise Collectorates should be strengthened and an audit manualprepared at the earliest available opportunity. The mission wouldrecommend that the Directorate of Inspection and 0 & M should also have anaudit wing consisting of a nucle._s of a Deputy Director, assisted by twoAssistant Directors who should in turn be assisted by at least oneSuperintendent of Excise and one appraiser. Strengthening of the auditmechanism can be expected to pay for itself.

(iv) Manual and Publications

3.44 The mission would suggest that the Manual cell at theheadquarters of the NBR be wound up. The staff sanctioned for this Cell isindicated in Appendix IV but it is understood that there are presently nostaff occupying those positions. Instead, there should be a Manual andPublications wing in the Directorate of Inspection, 06M, and Audit. Thiswing could consist of one Deputy Director, two Assistant Directors assistedby one Superintendent of Excise and one Appraiser with some stenographicsupport. This wing should be responsible for (i) preparation as well asupdating of various manuals of Departmental instructions, (ii) making themavailable to officers of the Department in the field; (iii) publishing allnotifications, orders and instructions of the NBR. It should functionunder the guidance of the Director. A blue print of the reorganizedDirectorate of Inspection, O&M Audit, Manual and Publications is presentedin Appendix V. It would be accountable to different members depending onwhether the relevant matter concerned customs, excise or administration.

3.45 The reorganization and strengthening of this Directorate shouldbe completed within two years.

D. Directorate of Drawbacks

3.46 Chapter 2 has proposed strengthening existing administrativeinstruments with a view to phasing in a manufacturing-cum-import stage VAT.Of critical importance in that regard is an administrative infrastructure

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capable of implementing the proposed extension of existing drawback andcrediting procedures. It was suggested there that separate officers beearmarked for handling rebate claims relating to exports in bond withoutpayment of duty in the Excise Collectorates at Dhaka, Khulna andChittagong. With a view to ensuring efficient functioning of the duty freeimport administration, the NBR has recently introduced a Duty Exemption andDrawback Office (DEDO) Cell in the Directorate of Inspection and Trainingwithin its sanctioned strength. While some staff have been assigned toperform tasks for the DEDO, the latter has yet to start functioningeffectively. The mission suggests that the DEDO Cell should become thenucleus of a separate independent Directorate of Drawbacks, BondedWarehouses and Rebates under the NBR, which should be set up within oneyear. An outline of the proposed Directorate appears in Appendix VI. Itwould report to Member (Customs) and Member (Excise).

2. Anti-Smuvelina. Anti-Evasion and Valuation

A. Directorate of Customs Intelligence and Investigation

3.47 The Directorate of Customs Intelligence and Investigation isentrusted with intelligence, surveillance and investigation work in orderto enforce the customs, excise, narcotics and liquor laws. Its activitiescover the entire range of importation, exportation, transit or circulationof goods, capital and means of paymert, both involving the collection ofduties and taxes and the enforcement of prohibitions, restrictions andcontrols. The Directorate is also required to maintain links with theCustoms Cooperation Council in Brussels, the U.N. Commission on narcoticdrugs, and with Interpol and the ESCAP countries to exchange information oncustoms administration and narcotics control. The organizational chart ofthe Directorate showing sanctioned and working strength appears as AppendixVII.

3.48 The mission observed that the operational units of theDirectorate have been dispersed all over the country and arranged in zonal,sub-zonal and regional form, keeping in view the special needs andimportance of the customs and excise points. Table 3.2 below provides thenumber of seizures made and the value of goods seized classified separatelyby customs and excise violations, not only by the Directorate ofIntelligence and Investigation, but also by the Collectorates and theBangladesh Rifles in 1985/86 and 1986/87 (the latter up to October 1986).

3.49 Apart from making seizures under the customs and excise laws,the Directorate has been investigating cases of fraudulent evasion.Reference was already made to the unavailability of all-Bangladeshstatistics on raids, searches and seizures, arrests and prosecutions, sothat the available evidence on this subject has an anecdotal flavor. Themission was informed that on one occasion an investigation carried out atChittagong found fraudulent evasion of sales tax and customs duty rebateworth Taka 48,479,000; some evidence was further provided on detection ofsimilar evasion estimated at about Tk 150 million a year. Anotherinvestigation conducted at Dhaka airport detected forged treasury depositslips ("challans") showing payment of customs duty and taxes amounting toTk 1.6 million, while two separate cases uncovered evasion of excise duty

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and forged treasury challans worth Tk 13 million. While such evidence isby itself not conclusive, the references to smuggling and other irregularpractices in the FY87 budget speech, the Tk 300 million increase in revenuefollowing reductions of import duty on fabrics in that budget andimpressions gathered by the mission during its visit suggest that evasionof CDSTs and excise duties has assumed disturbing proportions.

3.50 The mission is of the opinion that in view of constraints underwhich the Directorate has to function, its achievements both in the matterof seizures made and investigations carried out are not insignificant. Ithas provided valuable support to the various field units engaged in anti-smuggling, anti-evasion activities and in the prevention of fraud and abuseof narcotic drugs. However, the enormous change in the nature and extentof fiscal and narcotics offenses makes the Directorate as it is currentlyorganized no longer adequate to deal with the emerging situation.

3.51 This is because the existing organization suffers from thefollowing weaknesses. First, the Directorate's field organization is fartoo spread out throughout Bangladesh and therefore dissipates scarceresources at places where it can act by merely liaising with intelligenceand investigation wings of sister collectorates. This duplication ofeffort can be avoided, as will be seen below. Second, the sanctionedstrength in the Class I Cadre is meagre and working strength is roughlyfifty percent of that low figure. While adequate subordinate staff arerequired, the need for fully trained and adequately equipped manpower athigher levels cannot be adequately emphasized. There is thereforeconsiderable scope for curtailing staff in the category of sepoys. Third,there is an almost total lack of modern equipment. Fourth, there is noall-Bangladesh index of suspects and no dossiers kept on such suspects.Fifth, there is no system of suspects alerts. Sixth, while the customs andexcise law empowers departmental officers to search, summon, seize andarrest, the mission understands that powers to prosecute offenders incourts of law have been taken away, thus seriously hampering anti-smugglingactivity. Finally, there is little evidence of liaison with the Collectorsof Customs and Excise, with the direct taxes departments and withparamilitary and police organizations.

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Iihkj&.2: Saisuzes Classified by Customs and Exciso Violations

195-8a 1986-87 (Upto Oct. 1966)

Number of Value of Goods Nuber of Value of GOods

Unit Classification SaiZurts Seised in Tak- Sisuoes Seized In Takes

Dknzetoat of Custom 149 Tk 6.09.45.086 22 Tk 1.18.,52,7S7

Inta llgoneo &

Inseatiga£ nas Excises 89 Tk 9,96.787 3 Tk 13,20.62,586

Custom souse Customs 886 Tk L4.37,41,253 10 Tk 48.45,847

Obaka Exciso x x x

Customs 6 Customs 47 Tk 84.47,821 71 Tk 6.47.739

Exeise, Ubaka Excise '19 Tk 2,95,69.335 x x

Custom Bouse Customs 202 Tk 8.94.400,000 9 Tk 4,35.76,000

Chittagons ExClso x x x x

Customs of Excise Customs 83 Tk 3.74,47,26L 2 Tk 3,07.600

Chittagong Excise 5 nk 9,87.455 1 nk 1.07.620

:ustem Ruse. Customs 62 Tk 9.58.87,000 16 Tk 10.57.248

thulna . Exc t so x x x x

ustos & Excise Customs 27 Tk 33.10.43L 15 Tk 18.53.35'

huLno ExcLco L8 Tk 19.83.113 6 rk 37.40.78'

angledesh Rifles Customs 264 2k 1.62.72,876 89 Tk 3.37,93,019

Excls* x x x x

Source: National Board of Revenue

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B. Controller of Customs Valuation

3.52 The functions of the Office of the Controller of CustomsValuation, which is located in Chittagong are to: (i) ensure correct andconsistent valuation of goods imported into and exported from Bangladesh;(ii) scrutinize and investigate the accompanying invoices; (iii) establishand maintain liaison with various foreign institutions in general and theConsulates and Trade Commissions of Bangladesh abroad in particular todetermine the value of international trade cargo; (iv) study selling pricesof imported goods in the local market to verify the correctness of thedeclared prices at the import stage; (v) contact foreign manufacturers toobtain the correct value of goods being imported from them; (vi) scrutinizethe shipping documents of imported goods to ensure realization of fullcustoms duties; and (vii) maintain day-to-day contact with the variouscustoms field offices in Bangladesh. An organization chart of its officeshowing the revised sanctioned and working staff in various cadres is atAppendix VIII.

3.53 The mission has the following observations to make in this regard.First, although there is a separate post of Controller of CustomsValuation, no full-time officer has been placed in position and theCollector of Customs at Chittagong concurrently holds charge of thisoffice. Second, apart from vacancies in other cadres, only one AssistantController has been posted on a regular basis, notwithstanding theavailability of five Class I posts. Third, the branch offices at Dhaka andKhulna are yet to be established. Fourth, the mere existence of thisoffice has created a sense of complacency in the Custom Houses which hasconsequently diluted the basic responsibility ef the collectors for correctvaluation and therefore for correct assessment to duties. Finally, theoffice has not so far concerned itself with valuation on the excise side.

3.54 The mission is of the view that this office working independentlyof the Custom Houses and Excise Collectorates is capable of arriving atcorrect assessable values without getting involved in day-to-dayassessments which is primarily the function of the custom houses and excisecollectorates. This office can therefore bring to bear a certain amount ofobjectivity to its operations and can provide a valuable second line ofdefense against any potential loss of revenue on account of incorrectassessable values.

3.55 The mission was given to understand that between 1980 to 1983, Tk220 million were realized as additional duties as a result of the checkscarried out by this office, as against an expenditure of Tk 3 million onits upkeep. While these figures need updating, they support the view thatthis office can render very useful service in augmenting revenues. Itshould be made more effective by having a complement of a few class I andclass II offices, such as 2 Deputy Controllers, 4 Assistant Controllers, 6Appraisers, 4 Superintendents of Excise with support of a few stenographersand UD and LD assistants.

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3. Recommendations

A. Office of the Directorate-General

3.56 Intelligence and investigative work is also carried out by theexisting collectorates of customs and excise. To help develop acoordinated perspective, the mission suggests that the preventive andintelligence operations of the collectorates and the existing Directorateof Customs Intelligence and Investigations be brought under a single officewith comprehensive terms of reference outlined below. This office will bethat of the Directorate-General of Revenue Intelligence, Investigations andOperations, Valuation (Customs and Excise), Narcotics and Liquor. It willbe responsible for all intelligence and investigation operations, allmatters pertaining to customs and excise valuation as well as the narcoticsand liquor unit.

3.57 The organization should be headed by a Director General, whoshould be one of the seniormost Collectors. He should be supported by anumber of Deputy Directors looking after administration, intelligence,investigations, operations, valuation, narcotics and liquor. TheDirectorate should have field offices at Dhaka, Chittagong, Khulna and atone more suitable place, each one of them under a Deputy Director. EachDeputy Director should be assisted by an Assistant Director. They, inturn, should be supported by a Superintendent of Excise, an Appraiser and afew intelligence officers. The distinction between senior intelligenceofficers and intelligence officers could be abolished. Each unit shouldhave some stenographic and assistant support.

B. Customs Intelligence and Investilation

3.58 It is clear that the function of the existing Directorate ofCustoms Intelligence and Investigations would be absorbed by the newlycreated office. The mission suggests that the Directorate (i) select staffwho have an aptitude for preventive and intelligence work and that thosedeployed should undergo training courses from time to time; (ii) beconcerned primarily with cultivation, development and dissemination ofintelligence rather than actual enforcement; (iii) investigate only thosecases which have potentially large revenue .mplications; and (iv) liaisemuch more closely with international organizations such as Interpol, theU.N. Division of Narcotic Drugs, and the Customs Cooperation Council.

3.59 The mission recommends that powers to prosecute offenders incourts of 1Rw bt restored forthwith. However, since officers of theDirectorate have not carried out this function for some time it isessential that a crash course as well as a regular programme of training inhandling prosecutions be organized for selected officers by the proposedDirectorate of Training. Such training should cover relevant provisions ofthe customs, excise and the narcotics laws, all aspects of filing andconducting prosecuticn in courts of law and the court's powers underexisting laws. Reputed lawyers and senior police officers could be invitedto deliver talks to trainee-officers, It is further recommended that theNBR should carry out a systematic study of prosecution cases and strengthendepartmental machinery for handling court-related matters.

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3.60 The mission believes that most of the staff requirements can bemet out of changes proposed in the existing set up and by suitableeconomies. Considerable economies can be effected by reducing the numberof sepoys (to virtually half of its sanctioned strength) and the number ofpeople in cashiers, UDA and LDA cadres. The Directorate should alsomaiuitain offices in fewer locations than at present. A chart of theproposed Directorate as part of the new Directorate General's Officeappears in Appendix IX.

C. Valuation

3.61 The mission recommends that the existing office of the Controllerof Cus oms Valuation should (i) be reorganized to become the Office of theController of Customs and Excise Valuation; (ii) cease to be an independentoffice and become the Valuation wing of the Directorate General of RevenueIntelligence, Investigations and Operations, Valuation, Narcotics andLiquor and (iii) be made more effective by having a complement of a fewclass I and class II officers, such as 2 Deputy Controllers, 4 AssistantControllers, 6 Appraisers and 4 Superintendents of Excise with support of afew stenographers and UD and LD Assistants. It further recommends that theAdministration and Account branch and the Chittagong branch of the officeshould be wound up, that no provision be made for a separate office atKhulna and that the resulting economies achieved be utilized elsewhere.The organizational chart of the office of Controller of Customs and ExciseValuation as a wing of the Directorate General of Revenue Intelligence andInvestigation may also be consulted in Appendix IX.

D. Valuation Basis

3.62 Section 25 of the Customs Act, 1969, provides the legal frameworkfor valuation of goods for purposes of import and export and theirassessment to customs duties based on the concept of the normal price.However the NBR has, by means of executive order, moved towards the invoicevalue or the transaction value concept, for instance in the case ofmachinery imports. The mission understands that as far as legalinstruments are concerned, the NBR has yet to formulate detailed rules ofvaluation both under the Customs Act, 1969, and the Excise and Salt Act,1944. In case the normal price cannot be determined or ascertained, therules should provide for clear alternatives, both on the customs and excisesides. The mission recommends that the NBR move speedily towards thedetermination of normal assessable prices.

E. The Organization of the Controller of Narcotics and Liquor

3.63 This organization implements the Excise Act, 1909, relating tonarcotic drugs and alcoholic drinks. There is a Controller of Narcoticsand six Deputy Controllers. Of the latter, one functions as SecondSecretary (Narcotics & Li.quor) in the NBR's office, another in theNarcotics Intelligence Bureau in the Directorate of Customs Intelligenceand Investigation while the remaining four are shared by the four civildivisions of Bangladesh. There are 21 Assistant Controllers and 28Superintendents; there is one Assistant Controller in each of the olddistricts. There are 125 Inspectors, 60 sub-inspectors and 480 sepoys.

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The mission suggests that a more judicious husbanding of manpower resourcesrequires a revamping of the Department of Narcotics and Liquor. The postof sub-inspectors could be abolished and the cadre upgraded to Inspector'sgrade. Officers of customs and excise should gradually be entrusted withwork relating to narcotics and liquor as well. The mission is of theopinion that it may be possible for the NBR to effect some economies byreducing sanctioned strength to the actual working strength and byutilizing the resulting savings to augmes.t manpower elsewhere.

3.64 The set of organizational changes recommended in this sectionshould be implemented within a period of one to three years.

IV. FIELD-LEVEL ORGANIZATIONS

3.65 As mentioned earlier, the field-level organizations responsiblefor customs and excise administration are the Custom Houses andCollectorates of Excise. There are five executive collectorates: twoCollectorates of Customs, one at Chittagong and the other at Dhaka; andthree Collectorates of Excise and Customs at Dhaka, Chittagong and Khulna.There are, in addition, two Collectorates of Appeal at Dhaca andChittagong.

1. The Custom House. ChittaMong

3.66 Table 3.3 shows that the share of Chittagong Custom House in theoverall customs duties and sales taxes collected by the NBR is aroundseventy percent. It is therefore the most important Collectorate under theNBR from the point of view of revenue. An organization chart of theCollectorate showing sanctioned and working strength in various cadres isat Appendix X.

Table 3.3: CDST Collections in Chittagong Custom Houseand in Total (millions of Taka)

Collections by CustomYear Customs Sales Tax Total House, Chittagong

1981/82 8,830 3,250 12,080 9,5901982/83 8,700 2,980 11,680 10,1601983/84 9,600 3,590 13,190 11,1401984/85 11,830 4,460 16,290 14,3201985/86 13,390 4,600 17,990 15,630

Source: National Board of Revenue.

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3.67 The mission recommends certain basic changes in the organizationof the Chittagong Custom House. In order to strengthen anti-smugglingoperations, it is recommended below (see paragraph 3.85) that threepreventive collectorates be established at the field level. In that event,the customs jurisdiction of the Collector of Excise and Customs,Chittagong, should be restricted to his existing jurisdiction minusChittagong town which would come within the purview of the Collector ofCustoms (Preventive and Intelligence). The Custom House would then be leftexclusively with work relating to clearance of import and export cargo andrelated matters and the Collector of Customs would be able to devotepersonal attention to important matters of appraisal and classification.

A. Basic Xorking Unit

3.68 The mission recommends that the basic operational work of theCustom House as well as the port be carried out in a number of small andcompact groups headed by an Assistant Collector. This structure shouldapply to appraisal work whether in the Custom House or in the Jetties; toImports; to Export Refunds, Rebates and Drawbacks; to Disposal ofconfiscated/uncleared cargo; and to Establishment and Administration.

B. Custom House and Jetties

3.69 On the appraisal side in particular both in the custom house andthe Jetties, there should be as many units as required, each unit handlingdocuments for clearance of goods falling under sets of chapters of thecustoms tariff.

C. Custom House

3.70 The organizational chart at Appendix X indicates that there can beas many as 44 appraisers on the appraising side of the Custom House. Thiscould imply as many as ten appiaising groups, each with four appraisers,and no more than one UD Assistant and one LD Assistant/stenotypist. Withineach unit, there should be heading and sub-heading wise distribution ofcommodities under the customs tariff. During its visit to Chittagong, themission was given to understand that the average number of Bills of Entryfiled each day was about 300. This would mean that no appraiser would haveresponsibility for more than 7 Bills of Entry per day.

D. Jetties

3.71 The number of appraisers deployed in the Jetties is shown to be27. The mission was informed that the number of jetties in the port is 17.It is suggested that there need not be more than one appraiser for eachjetty during the main day shift. During the evening/night-shift, if any,three or four jetties could be in charge of one appraiser. The mainfunction of appraiser in the jetties would be to carry out selective

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examination of packages before ordering release of the consignment.However, the purpose of these suggestions is more to raise the issue ofappropriate deployment than to put forward specific numbers. The latterwould have to be decided either by Collectors and their senior colleaguesin the Custom Houses/Collectorates of Excise or by officials in the NBR.

E. Other Units

3.72 The unit in the Custom House handling ordinary refunds should bedifferent from the ones entrusted with drawbacks, export rebates andrepayments. Each of these units should be in charge of an AssistantCollector, assisted by a few appraisers. It is importar,t that thedrawback, export rebate and repayments unit be adequately staffed withappraisers. There should be a separate unit, again in charge of anAssistant Collector, for bonded warehouses and manufacture-in-bond. Thereis also scope for considerable amount of rationalization in the Importsection. The number of stages at which a Bill of Entry and associateddocuments have to be noted and stamped can be reduced. There should be afull internal audit branch under a separate Assistant Collector. Thebranch should be manned by experienced appraisers.

2. Valuation

3.73 During its visits to the collectors' offices in Dhaka andChittagong, the Mission found that the custom houses do not have a separateValuation, Classification and Investigation branch maintaining details ofvalues of past imports classified by major commodity and importer.Maintenance of dossiers on important importers and fiscal arrangementsbetween them and their foreign suppliers have been ignored. Similararrangements in each excise Collectorate need to be created, particularlybecause of the introduction of the self-clearance procedure. The missionbelieves that Collectors can organize such cells in their offices out oftheir existing staff resources. This would allow regular checking of (1)values declared in Bills of Entry for imports and in Shipping Bills forexports, and (2) price lists containing declaration of manufacturer's pricefor assessment to excise duties. These cells should maintain records forday-to-day reference and Collectors should regularly monitor theperformance of this unit. It has already been observed that there is aconsiderable amount of complacency as a result of the existence of theoffice of the Controller of Customs Valuation, Chittagong. Theresponsibility for ensuring proper customs valuation rests with the Officethe Controller of Customs Valuation. The mission believes that Collectorsin the executive collectorates should take primary responsibility formatters of valuation and assessment on a day-to-day basis.

3. Traininm

3.74 The Custom House should also establish its own training unit whichwould, in consultation with the Directorate of Training discussed before,offer regular refresher courses as well as appropriate training for freshappointees. This training unit could be under the Establishment andAdministration branch.

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4. The Custom House. Dhaka

3.75 The mission is of the opinion that considerable scope exists foreconomizing on staff in the Custom House. There is no need to haveseparate Chief Account Officers for Revenue and Expenditure, together withsupporting staff for each. One Chief Accounting Officer, with existingsupporting staff should be able to handle the work. Furthermore there isno need for separate air freight baggage and air freight units. Allbaggage which is brought as freight should remain at the airport for, say,a period of twenty four hours from the time of arrival so that passengerscan clear it directly from the airport. After a period of 24 hours, itshould be shifted to the Airfreight section of the Custom House, from whereit can be cleared. There can be considerable saving in manpower if theseparate Airfreight baggage section is wound up. As things currentlystand, the staff sanctioned even for the Airfreight Section appears to beexcessive. There is scope for economy in the posts of inspectors, UD andLD Assistants and Sepoys. They could be reduced by half, in addition tosaving on the entire staff for the separate Airfreight baggage section. Ifnecessary a minimum number of staff could be left for handling baggagebrought as freight and held at the airport before being shifted to theAirfreight section. It also appears that the number of Inspectors andSepoys for shift duty at the airport for passenger clearance is excessive.The mission finds considerable scope for economy here.

5. Excise Collectorates

3.76 Similar economies may be effected in the Excise Collectorates;Thus, there is no need for two Chief Accounts Officers in each of theCollectorates at Khulna, Chittagong and Dhaka. There also appears to beconsiderable scope for exercising economy in deploying UD and LDAssistants.

3.77 The headquarters Audit and Preventive branches should be separatedand strengthened. The Audit branch should also have a few appraisers. Themission also suggests that a study of the staffing pattern in the circles,land customs stations, land customs godowns and check posts should becarried out urgently and such units as are in close proximity to each othernot have separate auxiliary staff such as Head Assistants, Cashiers, UD andLD Assistants. The mission feels that 8 Sepoys for each of these units isexcessive. It is important that any large scale reorganization andrevamping of the field units ensure that cadres which have lost much oftheir relevance be kept to a minimum. The substantial savings in manpowerin such cadres can be utilized in strengthening Class I and II cadres bothin the existing as well as in the additional organizations suggested inthis report.

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6. Collectorates of Appeal

3.78 Besides the five executive Collectorates, the NBR has provided twoCollectorates of Appeal, one at Dhaka and another at Chittagong withseparate establishments of their own. Table 3.4 indicates the numbers ofreceipt of appeals, disposal and remaining balance during a selectedperiod. It may be noted that the number of cases disposed of, especially inthe Dhaka Collectorate, has been strikingly low.

3.79 The mission does not believe that there is any need for twoCollectorates (Appeals) and recommends that the one at Dhaka be wound up,thus providing for saving in money and manpower. The Collector (Appeals)at Chittagong could travel once a month for hearing appeals on the spotsuch as at Dhaka and other important places. Further, the Collector(Appeals) at Chittagong need not have any Establishment and Administrationstaff of his own. The assistance needed in the form of one or twoAppraisers, one Superintendent of Excise, and some stenographic andauxiliary staff support could be provided either by the Collector ofExcise, Chittagong or the Collector of Customs, Chittagong, thus providingconsiderable savings in manpower. The mission would also suggest that theOffice of Registrar in the Collector (Appeals) office be dispensed with.The organizational charts relating to the five executive Collectorates andtwo Collectorates of Appeals are at Appendices X to XVI.

Table 3.4: Collectorates of Customs & Excise (Appeals)Data on Disposition of Appeals

OpeningBalance Receipt Disposal Balance

DHAKA

August, 86 45 4 nil 49September, 86 49 5 7 47October, 86 47 7 4 50

CHITTAGONG

September, 86 315 23 56 282October, 86 282 19 36 265November, 86 265 4 17 252

Source: National Board of Revenue.

7. Collectorates (Preventive and IntelligenceTl

3.80 In order to strengthen the preventive and intelligence functionsof field-level organizations and help ensure that they receive adequateemphasis from senior level officers unencumbered by other responsibilities,

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the mibsion recommends that thr.i, ,ndependent Collectorates (Preventive andIntelligence) be set up with lo,-ations in Chittagong, Dhaka and a suitablestation near the Bangladesh-India border. These Collectorates should takeover all anti-smuggling, preventive and intelligence work from the existingCustom Houses in their respective jurisdictions, leaving the latter toconcentrate on other activities. Thus, for example, the jurisdictions ofthe Collectorate (P&I) Chittagong would extend over Chittagong port andtown. A considerable part of the staff needed for these new Collectorates(P&I) can come from the Custom Houses and Customs and Excise Collectorateswhich would be giving up this part of their work. As a measure of economy,Collectorates (P&I) at Chittagong and at Dhaka could be administrativelylinked to the two Custom Houses only for certain ;prely administrativeoperations, so that duplication of staff arrangements can be avoided.Similarly. the Collectorate (P&1) on the Bangladesh-India border couldacquire staff from the Collectorate of Customs and Excise at Khulna.

3.81 The field level reorganization recommended here should beimplemented within a period of one to three years.

V. IQSOMEIL IMP;L,ACKT

3.82 It is the mission's view that implementation of the aboverecommendations will not require significant new expenditures by thegovernment. This is because part of the new staff required in units whoserole is to be strengthened could come from a reorganization and merger ofexisting units and, where appropriate, from changes in existing personnelpolicies such as selective upgradation of customs and excise officers, soas to add to the pool of Class I officers. Eventually, however, it isessential that examinations to fill positions for Class I officers becarried out on a regular basis.

3.83 The discussion earlier in the chapter makes clear that much of thestaff in reorganized units will come from units which discharge thosefunctions under the existing system. Examples are provided by the officeof the Director of Customs Intelligence and Investigation, the Controllerof Customs Valuation, the Training Academy at Chittagong and the ManualCell at NBR's headquarters. While personnel decisions will have to be madeby Collectors, their senior colleagues and officials in the NBR, it issuggested that other redeployment be effected by (1) eliminating theseparate Airfreight Baggage section at the Dhaka Custom House; (2) windingup Collectorate (Appeal) at Dhaka; (3) linking Collectorate (Appeal) atChittagong administratively with one of the executive Collectorates atChittagong; (4) removing one of the two posts of Chief Accounts Officer andsome associated staff in the field-level Collectorates of Customs andExcise; (5) reviewing staff deployment to provide common auxiliary supportstaff in circles, land customs stations, land customs godowns and checkposts in close proximity to each other; (6) closing of minor offices of theDirectorate of Customs Intelligence and Investigation in far-flung areas;and (7) checking excessive growth of Class III and Class IV personnel.

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VI. OTHER RECOMMNDATIONS

1. Revenue Accounting

3.84 An important aspect of efficient revenue administration is astreamlined system of revenue accounting which allows for speedyreconciliation of accounts between the department entrusted withrealizations and institutions which actually receive payments. Theexisting arrangement for payment of excise and customs duties (except forcollection of customs duties at Chittagong and Khulna Custom Houses) isthrough treasury deposit slips ("challans") deposited in the Bank ofBangladesh (or Sonali Bank where Bank of Bangladesh has no branch) andother treasuries and sub-treasuries of the government located in districtand sub-divisional towns. Copies of the treasury challans are presented tothe excise circle office as proof of deposit and the amount then creditedin the manufacturer's "Account Current Register". The goods aresubsequently cleared by debiting the "Account Current". The circle officessend the revenue collection figures to Collectorate headquarters where therevenue figures are consolidated manually, a process which invariably takestime. It is the responsibility of the Accountant General to reconcile theamounts shown in the treasury challans with the amounts received by him onbehalf of the government. However, the mission was informed that thissystem has run into difficulties and that there are doubts about theaccuracy of the collection figures.

3.85 The existing system suffers from certain major weaknesses. Thegovernment has noticed several instances of forged treasury challansthrough which higher than actual amounts were shown to have been depositee.It has not been possible for the NBR to implement a procedure which wouldensure that all challans are duly verified. Large amounts of governmentrevenue so deposited do not get accounted for in government accounts withthe Bank of Bangladesh. Even where deposits are accounted for, there isconsiderable delay between time of deposits and the actual accounting. Themission understands that the Ministry of Finance is quite concerned aboutthe flaws in the existing arrangements.

3.86 The mission was informed that the NBR is actively consideringintroduction of a system which would (i) require payment of excise andcustoms duties through banks; (ii) provide for a system of reconciliationof receipts as between the department and the banks; and (iii)departmentalize revenue accounts.

3.87 Every collectorate under the NBR with the exception of the CustomsHouse at Chittagong has been provided with a Principal Accounts Officer(PAO) and some supporting staff. The mission recommends that the proposedsystem be adopted and therefore that a PAO, with a small complement ofsupporting staff, should also be provided for in Chittagong Custom House.The PAOs should be provided with equipment to enable them to computerizeall receipts. The experience of India, where the system of revenueaccounting through the Accountant General suffered from similar defects andwhich switched over to departmentalization of accounts and payment throughbanks may be of interest and is detailed in Appendices XVIIA and XVIIB.

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3.88 This recommendation should be implemented within two years.

2. Computerization of Customs and Excise

3.89 The mission recommends that computerization be introduced in theexecutive collectorates and in the Directorate of Research and Statistics.The following paragraphs discuss the advantages of computerization in thecollectorates: the corresponding discussion for the Directorate ofResearch and Statistics appeared earlier in the chapter. While this isintended to cover ultimately all the executive collectorates, it issuggested that NBR initiate a pilot project in one of the collectorates(other than Chittagong) on an experimental basis.7

3.90 The use of computers can be expected to improve: (i) efficiencyand quality of administration; (ii) utilization of manpower; (iii) controlover and collection of revenue; (iv) control over realization of revenuearrears; (v) control over under-invoicing and over-invoicing and helpachieve uniformity in valuation matters; (vi) control over tariffclassification; and (vii) quality and coverage of statistical information.Thus, the purpose of computerization is to build up an information systemwhich can allow the tax administration to conduct effective auditingactivities. The mission believes that computerization and auditing arecomplementary activities; the former is not to be regarded as a substitutefor the latter.

Customs

3.91 Any plan for introduction of computerization should take intoaccount the need, on the customs side, for a simple system of mechanizationof import cargo clearance which would involve (i) reduction andsimplification in stages of processing of Bills of Entry; (ii) doing awaywith the practice of moving Bills of Entry by clearing agents from onecustoms officer to another, (iii) streamlining and improving the system offiling information at various stages; and (iv) expediting the clearance ofconsignments for which documents have already been filed and duty paid.Computerization would facilitate the creation of a data base containinginformation such as quantum and total value of imports by commodity andinternational invoice prices, together with their trends in internationalmarkets; rates of duty, total duty collected and the purpose of importbroken down by importer, and restrictions under different laws which thecustoms organization is required to implement. It would help assign codesto importers which, in the case of holders of account current with thecustom houses, could be the account current number. The data base couldalso include cases of shortfall in or excess payments of duty to enablecollectors to pursue arrears of revenue and to expedite reforms. Thesystem would also keep track of the amount of customs duties foregone as aresult of application of concessional rates of duty provided by severalexemption notifications. In addition to monitoring the above items on a

7/ This is to minimize the potential for interference with day-to-dayoperations arising from learning on the pilot project. Given theimportance of Chittagong Cubtom House in total revenue collections, thepilot project should be started elsewhere.

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daily basis, the data base could capture information regarding cases ofunder-invoicing and over-invoicing, tariff classifications, nvmber ofimport and export documents, number of Bills of Entry inviting single andmultiple tariff classification and therefore rates of duty; number ofimport and export documents handled by each appraiser; number of objectionsraised by each appraiser and the number of audit objections.

Excise

3.92 A similar system for data collection *:ould be designed on theexcise side. The Excise department carries out assessment of excise dutyon the monthly return supported by gate passes, the treasury challan, theAccount Current and other accompanyir- documents This includes a check ofproduction and value figures by it and formation of the tariffclassification, and the applicable e.. tive rate of duty with reference toa particular notification. Compute: 'ation should therefore extend to allgate passes for checking assessmert and unit value data from the point ofview of uniformity and monthly returns for revenue, production andclearance. The data base would include information regarding excise andother duties broken down by commodity units and formation and providedetails as to whether the payee is in the small scale or organized sectorof the economy.

Linking

3.93 The computers in the Collectors' offices should be linked with thecomputers in the Directorate of Research and Statistics in the NBR.

Introduction and Phasint

3.94 It is strongly recommended that procedures and systems becarefully studied prior to introduction of computerization and thatadequate allowance be made for start up problems that can be expected toattend its implementation. The O&M wing in the proposed Directorate ofInspection could undertake this task of developing a comprehensive systemdesign, drawing on the experience of other countries with similar taxsystems that have introduced computerization of the customs and exciseadministration.8 Actual implementation will call for a phased programwith much of the learning occurring via a pilot scheme which is eventuall.yextended to all executive collectorates. This recommendation should ,eimplemented over a period of three to five years.

Training

3.95 Reference was made earlier to the need for a statistical branch inthe Collectorates reporting to a Deputy Director. Since the reliability ofcomputer output is highly dependent on the accuracy of data entry, thereshould be provision for training programmers and analysts. Only thosecustoms and excise persennel who have a- aptitude for data processingshould be selected for training.

8/ It may be mentioned that Pakistan has computerized customs and exciseadministration and India is in the process of doing so.

- 77 -

3.96 The NBR is proceeding with a first phase of computerization inthree offices and at the Board and it is understood that progress is beingmade towards procurement of equipment, choice of consultants and design oftraining programs.

3. Customs And Excise Tariff Nomgnclature

3.97 The existing customs tariffs in Bangladesh is based on the CustomsCooperation Council Nomenclature (CCCN). The Excise Tarirf is a muchshorter tariff and consists of two parts. Part I covers specified productswhich are subject to excise duties; Part II covers specified services suchas services rendered by hotels and restaurants, decorators and caterers,cinema houses and other enterprises providing entertainment, automobilegarages and workshops and a few others. There is no similarity between thecustoms and excise tariffs, a feature which makes it difficult to matchtheir constituent categories.

3.98 The mission recommends that the government adopt the HarmonizedSystem of Nomenclature (HSN) for both customs and excise tariffs over athree year period.9 There are clear advantages to doing so. The HSNprovides a comprehensive classification system which is simple and preciseand can be objectively applied to secure uniformity of classification atthe national and international level both for collection of duties as wellas for statistical compilation. Under the existing system, the samecommodity has to be described many times as it passes from one country toanother in international trade. This leads to absence of comparability intrade statistics across countries as well as errors in the application ofcustoms and freight tariffs. Furthermore, international trade data cannotbe readily transmitted from one country to another in the absence ofmutually acceptable and recognized standard codes. The Harmonized Systemwill substantially overcome these problems and facilitate standardizationof trade documentation and codes for goods entering in international trade.Furthermore, the comparability of the resulting customs and excise tariffswill present policymakers with a much clearer picture of the extent ofprotection provided by CDSTs and excise duties. There are 48 countries whoare already signatories to the H.S. Convention; seven of those haveratified it without reservation.

VIII. REVENU IMPLICATION

3.99 The mission believes that the package of administrative reformsproposed in this chapter has the potential for raisinB additional revenuefar in excess of the extra costs of reorganization.1 Revenue raised inthis way places no additional burden on taxpayers already in compliancewith tax regulations.

9/ Since the first draft of this report was prepared, the government hasdecided to adopt the HSN for the customs tariff effective July 1, 1988.The HSN will not however apply to the excise tariff.

10/ The mission was informed by officials of the NBR that costs ofcollection for most taxes under its jurisdiction range from I to 1-1/4%of revenue collected.

- 78 -

APPENDIX I

List of Tax Reports Received in Customs Branch ofResearch and Statistics Wing, National Board of Revenu1l

1. Quantity and value of imports, import duty and sales tax collected,classified by type of commodity imported (B.T.C. classification).

2. Quantity and value of exports, export duty, classified by type ofcommodity.

3. Value, duty and sales tax for imports, and value and duty for imports,classified by tariff chapter.

4. Critical revenue review statement.

5. Provisional statement of customs duty and sales tax classified bytariff chapter.

6. Fortnightly provisional statement of customs duty and sales tax,total.

7. Statement showing shipment of raw jute.

8. Statement on wage earning scheme.

9. Revenue deposits and adjustments for imports and exports.

10. Statement showing the number of L.C.s opened under cash and the amountof L.C.s outstanding.

11. Overall position of specific large cases in arrears.

12. Goods classed under the baggage rule, value, duty, sales tax, by typeof goods.

13. Daily revenue statement.

14. Value and duty on items imported under a cash license.

15. Value and duty on items imported under AID.

16. Sales tax collected at standard 20 percent rate, and below thestandard rate, by commodity.

17. Daily list of imports and exports, by commodity and name of importeror exporter.

1/ Statements are prepared on a monthly basis unless otherwise noted.

- 79 -

APPENDIX I (cont'd)

List of Tax Reports Received in Excise Tax Branchof Research and Statistics Wing, National Board of Revenue2

1. Fortnightly exciso tax collections by excisable goods categories.

2. Provisional excise tax collections by excisable goods categories.

3. Critical revenue review statement.

4. Provisional collections on narcotics and liquor.

5. Final collections on narcotics and liquor.

6. Excise tax arrears.

7. Production statement on hand made cigarettes (Biri).

8. Production statement on manufactured cigarettes, by brand name.

9. Production statement on matches.

10. Production, clearance, duty on tea.

11. Collections on hand made cigarettes (Biri) by tax circle.

12. Collections from cinema houses, by tax circle.

13. Fortnightly statement of production, clearance and excise duty paid oncigarettes by the Bangladesh Tobacco Corporation.

14. Copies of Form RT-3, Monthly Return of Excisable Goods Manvfacturedand Issued.

Source: Compiled from information provided by Director, Research andStatistics Wing, National Board of Revenue and InternationalMonetary Fund.

2/ Statements are prepared on a monthly basis unless otherwise noted.

- 80 -

APPENDIX 11

Proposed Strengthening and Reorganization of the Director ofResearch and Statistics at NBR

Mi isufet)

tOimetet

Flin Seegosg CtggLe Slgtls

I e. tazeesit. mat4 0tiaped by the *&$$Lou

S Bet6SS S @t SS Se ~1

or I

(CusIm) (bets.)

£AM1. Dhzetou LAst. DOuae:te(Ca s) ta.)

Cuat Secti on e Selet totle. Sot

camo * :ioCeeam Se oe ratic"

Peen:s.. *~e raz Op..btt.

- 81 -

APPEODI III

Prooosed Segarate Director of Training

os." ~ ~ ~ ~ asin& os

1S 0.8. a Jrug a *lmut w Ii _ _1

c c,I-*-1. SSitC-% * Dh&ca 2Mtst*Da.t

1 Aamoa 2. Pgjot @pasea a AueeaoseICeabls s *,tjga (Ctmae C beta.) 2 &AV". Osf bese.2 C°u fJ2o"2 Ce~~~~~ a S~ a i.. oUt..

a awee,eua o f beta.2 IuS_we,a 2 Uqsiu

' Cmu

- 82 -

APPENDIX TV

Q;nization Setu= of Manual GCal

Collector I (No one inposition]Principal Appraiser 1Superintendent 1UDS 1Stenographer 1Steno Typist 1MLSS 2

!

- 83 -

APPENDIX V

Proposed Directorate of Inspection. O&M. Audit, Manual & Publications

rDtxect@z (Sent.: Collector)|

|P rsensl St ff

|Administration I nspection & 06H|M Audit l Hcusl andI aI I It!Publicatious

I Arst. Director 2 Dy. Directors 2 Dy. Directors1 Accountant 4 Ast. Directors 2 Asst. Directors 1 Doputy Director1 Ofic Supt. Custoam 2 Extisel 1 Supt. of Excise 1 Asst. DirectorAuxsiLiry Staff 2 Su1pts. of rcis@ 1 Appraisr 1 Superintendent

2 Appriser Auliary Staff 1 Appraiser

AuxilLcry Staff AxiLiry Staff

- 84 -

APPENDIX VI

Proposed Directorates of Dravbacks, Bonded Warehouses and Rebates

Director (1)

IPetsaie^ Stt 3,

Administration || D:baeeks Boubnded War.howuos |Eport R.bato

1 Assistant DLszctor I Deputy Director 1 Deputy Director1 Accountant 2 AseLatant Directors I Assistant Director1 Office Supt. * Appceieeza 2 Supt. of EZeise

Stenograbpic _id Stenographic and Stinosrcphic andAuxiliear Staff Suppogt AuntAiary Staff Suggort Aux. Staff Suggort

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- 86 -

APPENDIX VIIIRevised Organization

Office of the Controller of Customs ValuationNational Board of RevenueInternal Resources Division

Ministry of Finance and Planning

CONmOLER OF CUSTU6 VALUATION 64

Personnel: 31 Controller1 Stenographer1 Sepoy (Customs & Excise)

A6ministrti Uon Valuation Valuation Branch ValuationAccounts (Dheka) (Chittagong) (Ibhulnia)

Pu UoDSl Is Personnel: 10 P rsonnel: 22 Personnel: 101 Asst. Controller 1 LAst. Controller 1 Aset. Controller 1 Asst. Controller1 Office Supt. 2 Appraisers 2 Principal Appraisers 2 Appraisers4 UDA 1 HA 8 Appraisers I HAi Stenotypist 2 UDA 1 Office Supt. 2 UDA2 Typist cum LDA 1 Stenotypist 4 UDA 1 StenotypistI DupUcating Machias 1 Typist cum LOA 1 Stenotypist 1 Typist cum LDA2pr-tor 2 Sepoys (Customs & Excise) 2 Typit cum LDA 2 Sepoy E_2DriversI Sepoy (Custom & Excise) (Cultoms & Excise)3 Sepoy (Custom & Excise) 2 MmSS1 Daftary1 Security Guard2 mm -AUTSUNZAT! OF ArI s Ts. KMO 1ur3MT?

_1II~ADV ".qp AM MZSCZUALAOUS NOS:S1z Sanc- ist ReV- Transport:tion Ing Iad 1. The Department is authorized:

Clas I a. 2 cars for official use.1 Controller 1 1 1 2. Private use of transports will be as per2 LAst. Controller 4 1 4 goveronent instructions isaued from time to time.

3. Office quipsant: The following office equipmentTotal: S 2 5 may be retained by the Departrent:3 Cla * 16 e 16 a. 1 Duplicating machine

- 87 -

APPENDIX IXDIcoRA? GUAZ.0 NEDU ?N2u.LG3.

IWYKSUGATION AND t01l0St8. VALUATSO. RAK0?CS AD LtOU

Personal StaffI P.A.1 U.D.A.I O.S.

AdIttoio 1AdvjstieatttouanTrann lul:^cn |ttiine |edProseui_|_ouisence _ey UdLe ;t ~,Ot ",:= 2 Dep Contr*l:.r

4 Asat. cone:aiI Deputy Oirector 1 Dp. Dir. I Deputy Director 2 Asmt. Dlreotos 4 5 of -x-s*2 Last. Diroctorc 2 Aset. Di:. 2 AsJt. Di:eotoer 1 Supt. of lasts. 6 Lpta ;SS1 Supt. ot Etlese 2 Sat of a Supt of beta. 1 ppr ssz 41 Appeatssr 2 Apprdtserc 4 otsUlasuoo4 tzgtjlussnc 2 Appasresis 1S ongzUtoone u ssler Stemagraph:rs

Stsuogzspbe:e 10 A2tsLi. Coro temogapb:. Aux. StaffSte nogrep ro v Rcorsil StenographersAz Staft hrsar ttAuxtliary Staff Steanogrphers Auz. Staff

Aux. Staff

I ea teocs a Ltquor

1 Doputy Director :Comnunot=2 Supt. of mtcese4 Intell. Officers Aset DirectorS->tenographers 1 Su". of tbetsAux. Staff 1 Appraisr

a Intell. OfficersStetogrephoraAuz. Staff

chl'ttagong Dhaka xhulma ~~~~~~~~~~Aniother Suztaz-e

1 Doputy Director 1 Deputy Ditector 1 Deputy Directos1 AJst. Director 1 asrt. iorector 1 a et. DiXsoto:* AppraicseS 2 Appraisers 2 Appraisers S e other. Supt. of beats. 2 Supt. of ts.cte 2 Supt. of bretso stattona10 Intell. Otficers 10 Zntel. Officers 10 tntelL. OfficersStenographers Stenosraph*re StenosraphoreAux. Staff AUx. Staff Auz. Staff

# ~ ~~IZ9 - IN

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g e 11 - . {| ^-; -I^IIII "

Hi iWl!Itll l

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l Xill!!~~~~~~~~~~~~~~~~~~~~4lh

- 89 -ASmX 11

DUAKA CUSTO SOUSZ. VIAKA (NATIONAL. SO=M or SYIW )IVTAL E *068 DSMSICIS

1435UOf VZNAM AMP VLANINIS

S ASNIZATIDO

Personnel - 6

I Collector1 Stnograephet2 Sepoys1 tC DriverI Savildar

Chiet Aecounts Officer Jolnt Collector Coief Accounts Otfierj payP'&Accounts Officr

Personnel - 9 Peronnel - * Personncl - 9 Pesson*Ie - 9

I Chief Accounts Officer I Joint Collector I Chitf Accounts Officer 1 Pay Accounts OfficerI DA 1 Stenogrepher ' UDA. * LmA1 LDA-cim-Typlst 1 MC Driver I LDA-cm-Typist I WA-cuv-Typist2 MLSS I Sopoy 2 mm.5 2 mm.51OS lOS 10S

Dy .lAssists.nt ColL Dy /Assistmnt Coll Dy /Asestant Col.t (Alcrelht t"&U$*} | | (Artrzght Rast} | ond

Forsonnel - 65 Personnel - 130 Personnl - 41

i Dy /^rst Coll 1 Dy /Aret ColL 1 Dy It Lst Coll.i Suot. a Supt. 4 Supdts.24 Inspectors 45 Inspectors 15 InspectorslIas * OS 2Ias1KA 1R ISA:Cashier 1 Cashier 1 Cashir8 UDAS 30 UDAs 4 UDAcI Stenotypist 1 Stenotypist * LDA-cun-typists2 LDA-cu-Typits 1S LDA-cum-Typists 1 Stenotypist

D1 HD 1 Electrician I Dettry1 Doftry 1 Dam 1 avilder2 HIavidarr 1 Drcftsan 5 Sepoys20 S*poys 2 Havilders 1 Swesper/MlMSI Se*por/MLSS 20 Sopoyc

I Swop .laLss

Dy. /Asst Collector Dy Asat ColJ.*ctor Dy /Asst ColctorHead Q4arter 3 Offic*rs for shift- Foreign Post & Ibroy= n-

ing duty (airport) sonj Custom Station

Personnel 201 Personnel - t01 Dy/Aset. Collector1 AO 3 Dy iAsst Collectors I Dy /Asst. CollectorI SO 6 Supdtc 4 Supdts* Supdts. 140 Inspectors 20 Inspectors2 0O 2 Stenotypist* 2 OS2 P 4 Savilders 2 H1 Cohieor *S Sepoys 2 Cashior4 UDAc I Swcoper/MlLSS a UD2r* LDA-cus-TYpist 8 LDA-cum-TypiateI Stenotypist 2 Daftries

Electrician 2 lavildaroIXDM 16 Spoys2 eovildsr 2 SwepernlLSS10 Inspetor 1 Stenotypist10 Sepoy

I Dafto10 MrC Ortvez5 llUS

Droatmn1 Statsetical Instlsator

- 90 -

APPENDIX XI (continued)SUMMARY OF MANPOWE

SI. No. N.. of the posts Revised

Class-I1. ColLector 12. Joint Collector 13. Dy. Asst. Collector4. Statistical Officer 1

Total: 11

5. Class-II 296. Class-III 5507. Class IV 17

Grand ^.otal: 607

AUTHORIZATION OF TRANSPORTS. MAJOR EMUIPMENT AND MISCELLANEOUS POINTS

Transport:1 The Dhaka Custom 8ouse., Dhaka is authorized:

a. 2 Carsb. 3 Jeeps (1 for 2 Divisions)c. 1 Microbusd. 1 Buse. 10 Motorcycles

2. Private use of transport will be as per Government instructions issuedfrom time to time.

3. Office Equipnent: The following office equipment may be rotained by theDepartment:

a. 1 Ptoto copying machineb. 6 Duplicating machinesC. 24 Typewritersd. 2 Calculatorse. 4 Metal detectorsf. 6 Walkie-talkiesg. 1 Transmitting & Receiving Station

Abbreviations:

AO Administrative OfficerCAO Chief Accounts OfficerPAO Pay & Accounts OfficerSO Statistical OfficerSupdt. SuperintendentOS Office SuperintendentHA Head AssistantUDA Upper Division AssistantLDA Lower Division AssistantMC Driver Motor Car DriverDMD Duplicating Machine OperatorMLSS Member of Lower Subordinate Service

- 91 -

APPENIX RII

COLLECItORE OF CUSOM5 & BMW CHffrGONG

I~~~~~~~~~~~~~~~~~~

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2 5.0~6 1269,17 U0 2 L42

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6 Q.V4 a, 5 aIPVt _-S"a c, v aw

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- 92 -

*PP"DU nix

COU.UCOPAE aOF CUTaso A EMu DHAKA

COUICR_ 2011

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& 62000, I LOA.As1W 10 S1 Sk

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W D-,^C DCIAC I DL/AC OI 'ACOCIAC2 S&0-IMm, '0 S 2 S ' S10.* l031 n8 3 '680 'O -0 0I os. 2 os. 20s 203, 203s.LJOA, IC_ *UDO. 'C *UDAS2IDAO"% AO,ODA 2IDA AUDAS 2A $-cvn,ICe "_ 'Ce * Ic sce* 3-03 I0I DA I "3 '-.02I DA 00 amIM DO A 2MC 3-, IMc SIC D' _M* D40 'DM0 * D40 * D40 .UC D_

S ,b-5 S4 .00 2 SSaOO 2 5 2 50.*8- 'O S3 2 S I*, S mS4 MISSI aMISS 3"IS3, SISS, SM4SS,I*p ft.> MXI W If_aeOO 4Db

I$DPW 013- 'Lm A0 D-

'30ms8 000 3-" ' Cl0D83DOD07

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0C 5 _003-0 4 5 1- q S3 C 4 S _ spn a" G_ SP 2

.0,00. 0 ', em %.0- in 3-W-3

C.D0 7100CU.0.. a.. 4

'A.I 0 UISS S S

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0*_ '* -A *_ '02UOAO C- :.eA 2'CAS*O C 2I DA. *2 "W-2*1'UDAC 0LDA o02 22UDA IDA.2IA 5S 5 MIS DA C 0L. - I D^ Cu

'- SS BMS '.LmISS~

*5 , S? S . WM M2!$ nMm-5

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'mOo.. 'Mm II 00

:ODA A AaN2- -5dI It$$_ kV I 1 -V'.ca s M ,C taumD| 20

21*0, JIin0 . 2IDA O JD uAad0C3 1 1 0-

'MS 'COI 0 'M dVI|SS tx lO||q

2 Z_ d W* D o o . sraJ I '4o I */ I I s4~~~~~~w A ^ 2 C-, 2000 | |

21 DJ D DD _ GdaO | .- | .

CS S,_l as-R_SeBW ~ 42... Sxe ........ S _ 4 '_C-'0040Y14 .5_ UDA 20 4 - 4

S C. O f ,2*±O 'Z,r' c40 s. a. AI 4n a CM&

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0 ''.00.00 ~~~~~~~~.0om so S".

5 Mo.~~~~~~~~~4 0. M 4

- 94 -

APPENDIX XV

cn ~x ass o MesA <L} tss=COILCTAt! C 01 2I?" AIMD ICI! (AMta&) CUUTTAMO

WNTIDAL 29*USaU 0XVISI0 s .5t )

NI5Tss W fas AID A 11ASINS

0LLZCT0R 36

Pors!;nn*l: 3

1 Collector1 Stenographer (PA)1 Sepoy (Custom)

1 Registrar1 Stenotypist1 Sepoy (Custom)

Principal Estbt Admin SUPERINIENDENTAppraiser R & I CUSTOMS AND

fiCISE

Personnemsl: 5Personnel: 20

1 Principal Appraiser 1 Office Superintendent 1eSonne n

1 UDA 1 D (A Superintendent1 Typist cum LDA 2 UDA 1 UDA1 Record Keeper 4 Tpiste 1 Typist cum LDA1 Sepoy (Custom) 1 Cashier 1 Rocord K spsr

i Driver 1 SRopy (Custo m)1 Naik (Customs)1 Daftary1 Duplicating Machine Operator1 Darwan2 Notice Server3 Security (Guard)1 Sweeper

SUMMARY OF MANPOWER AUTHORIZATION OF TRANSPORTS, MAJORS1_ Namn of Wn-t* C^netIrne A.tt,pl P.v$mpA L=Juxtra4I ANUL FlJ.bCLLXSIuv ±4Jfs

No ~~~~~~~~~~~~~~~~~~~~TransRort:1. The office is authorized

Class I 1 car1 Controller 1 1 1 2. Private use of transports will2 Registrar 1 1 be sa per ( ) Instructionsissued from time to time.

Total 2 1 2 3. Oflice Ee&uiLm0n: The follow-

3 Class II 4 3 2 ing office quIpment be re-3 Class III 30 3 25 tained by the Department.4 Class III 30 20 25 a. 1 Duplicating Machine5 Class IV 7 2 7 b. 4 Typewriters. The re-

43 26 36 maining machines bereturned to the CentralStation _ ratio ofBengali end Englishtypewriters.

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APPENDIX XVI

COLLC AU 3Of CQTS AD AM hN (AI&NAL), CLAUTUU&lL 30:I9_= DiVS1i

MN2SThI 01 ?UM= AID ILAU

~~~~~~4~ 2

1 Collector1 St.ou.mgbez1 Sep (Custom)1 N.C. Dive:

1~~ ~ ~ ~ ftalp2 £se. 1 StenotypIst 1 upI satmteat

1 stpOttin .I Sam (Cuspo s)

I cSep0 1n lette OpeaI

PAMIPAL AMMSM DOitIm4 ATua

IL Stnot"ut 1Suptrintedengt

2 U.O.A. 1D"Mty _X2 nt1ITis et 2 U.D.C.3 L.D.A. I vSpst

4 CassI 30 Casie

l&%"*t 1 42 L.D.C.I MLSS I aneoX tes

Ou. a| 2So (Custo)2Samy 1 t tll Operaor

1Deft"N otice S ME

St Sanciond ActulNO: _f otf t Steatp2 Stcmtb

I Coletor

3 CUM-SS a 2* CUNG-SSS 30 25

Tota *t 3

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APPESNDIX XIIA

Revenue Accounting: The Emceriegne in India

The old procedure for accounting of revenue through the AccountantGeneral was more or less the same in India and suffered from exactly thesame defects. The Central Board of Excise and Customs therefore switchedover to the departmentalization of accounts as far back as 1977 andintroduced the system of payment of excise and customs duties throughnomuiated public sector banks except customs duties in those custom houseswhich have their own treasuries. The procedure for payment through banksas ir.troduced in 1977 and as modified in April 1986 is indicated inAppendix XVIIIB.

An appraisal carried out early this year of the revised scheme ofNone bank - one collectorate" for collection of excise revenue indicatesthat the system has led to very encouraging results.

1. Monthly statement of daily transactions. This documentindicates total collection for each day for the entire monthand forms the basis on which revenues booked by the PAOs andaccounted for by the bank are reconciled. The statementsfrom all the banks for the period April to November 1986 hadbeen duly received.

2. Reconcil5;tion between the PAOs and the banks. The figuresof revenue receipts collected and accounted for, for theentire period from April 1986 to November 1986 had beenreconciled and tallied.

3. Settlement. The revised scheme envisages that except for thelast one or two days of the month, the entire collections ofthe month are credited to government cash balances on a day-to-day basis during the same month. The entire collectionsduring the period April to November 86 had been credited mostexpeditiously to government cash balances except in a fewcases involving insignificant amounts.

4. oitrng f revenue collections during the month. The newscheme has generated a very efficient system of monitoringinformation relating to collections. The figures ofcollections made by the banks during the month are flashed tothe office of Chief Controller of Accounts by each PAO by the3rd or the 4th of the following month. The Chief Controllerof Accounts'office aggregates the information from each PAOand sends a consolidated report to the Central Board ofExcise and Customs by the 5th or 6th.

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5. Dlaved ReoittanCes. The revenue collected by the banksfirst travels from the collecting branches to the Focal PointBank whero credit is given to final Head of Account and thenfrom the Focal Point Bank to Government cash balancesmaintained at Nagpur through the link banks. In both theseareas there has been considerable improvement in promptromittances by the banks. In a study carried out it has beennoticed that delayed remittances amounting to about 17% oftho total excise duty deposits in May 1986, had been reducedto about 3% by November 1986.

6. Total Coverage by Govrnment Accounts maintained bX PAO. ThePAO is now ordinarily required to deal with only one FocalPoint Bank branch in the Collectorate. The scrolls, even forthe last day of the month, are received by the PAO andincorporated in the accounts for the same month. Anydiscrepancy or error is settled on a personal basis. Sinceonly one bank is responsible for the -ntire collection andits accounts, responses are much faster and accumulation ofany differences is avoided.

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APPENDIX XVIII

Procedure for Payment of Excise Duties ThroughPublic Sector Banks in India

Existing agencies and arrangements for collection of rev nue

1. After the departmentalization of revenue accounts of the CentralBoard of Excise and Customs (CBEC) with effect from lst April 1977, thecollection of revenue of the CBEC, (other than customs revenue and otherdues at the Major Customs Houses) is being made by the branches of ReserveBank of India (RBI), State Bank of Ind.a (SBI) and the branches of one ortwo public sector banks nominated for each Collectorate. The unit forrevenue accounting is the Collectorate and only the bank branches locatedin the jurisdiction of the Collectorate collect the revenue relating tothat Collectorate and make payments of refunds, etc. The collectingbranches pass on the collections and the scrolls and challans required foraccounting by the PAO of the concerned Collections and the scrolls andchallans required for accounting by the PAO of the concerned Collectorate,through their link branches and the 'focal point banks' (which are eitherthe RBI at metropolitan centres or specified branches of SBI at otherplaces). The focal point branches of SBI credit the collections to theAccount of CBEC with the RBI, Central Accounts Section (CAS), Nagpur,through RBI, New Delhi, after these are aggregated on a daily basis at SBI,Government Accoants Section, Inter-Office Accounts Department, Bombay. Thepayments of refunds are made through cheques drawn by the DepartmentalOfficers only on the focal point banks which render the payment scrolls(with the paid cheques) to the PAO of the Collectorate. The payments madeby the focal point branches of SBI are also debited to the account of theCBEC with the RBI, CAS, Nagpur, through RBI, New Delhi.

2. Experience of the working of the scheme for the past 8 years hadindicated that with the increase in revenue collections and the largenumber of bank branches handling the work, delays have often occurred inthe credit of the tax collections to the Government, in the transmission ofthe relevant documents (challans, scrolls, etc.) to the PAOs foraccounting, in the reconciliation of the figures of collections made at thebanks with figures accounted for by the PAOs and in the finalreconclliation between the accounts figures of the Chief Controller ofAccounts, CBEC and the figures reported by the RBI, CAS, Nagpur.

In March 1984, the RBI constituted a "Working Group on GovernmentAccounts' under the chairmanship of the Chief Accountant, RBI to review theworking of the scheme with reference to the network of branches engaged inthe collection and the changes required in the method of settlement ofGovernment transactions. The Working Group included senior officers of theGovernment of India and also of RBI, SBI and a few other public sectorbanks.

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In regard to the CBEC, the Working Group examined a proposal tothe effect.thae the banking arrangements for collection of tho tax duesshould be simplified with a twin objective, i.e., while the facility to theassessees to deposit money should be available at a reasonable level, thesystem should be such as to ensure prompt credit of Government revenues toits cash balances and should also provide for prompt and better accountingand reconciliation. It was, therefore, suggested that only one bank havingan extensive network of branches spread all over the Collectorate should benominated to collect the revenue 'or CBEC in the Collectorate and tofinally credit the collections to the Account of CBEC at RBI, CAS Nagpurand also to furnish the accounts to the PAO of the Collectorate. Thissuggestion was made as the multiplicity of banks operating within oneCollectorate resulted in delayed remittances of Government revenue and alsocomplicated accounting and reconciliation. Further, the Group observedthat the various public sector bank-s already engaged in the work ofcollection of the revenue have got a good spread of branches in differentareas of the country and the selection of suitable banks appropriate foreach Collectorate could be made without any difficulty. The bank selectedfor a Collectorate may be one of the banks currently dealing with its workand should, as far as possible, have branc^hes for meeting the needs of allRanges in that Collectorate. If the nominated bank did not have a branchin any particular area within a Range, the bank should make sub-agencyarrangements with another public sector bank which should be one of thebanks currently dealing with such work for acceptance of the dues so as toavoid inconvenience to the assessees. The branches of the bank sonominated for a Collectorate should render the accounts through its focalpoint branch at the headquarters of the Collectorate and settle thetransactions with the RBI, CAS, Nagpur direct through its link cell atNagpur. (In other words, there will be only one focal point branch for theentire Collectorate and it will belong to the bank selected for theCollectorate).

4. The recommendations of the Working Group referred to above wereaccepted by the Government of India, Ministry of Finance, Department ofRevenueN who directed that the selection of the bank for each Collectoratemight be finalized by the CBEC in consultation with the RBI after examiningthe network of the branches of the various banks. The selection of thebanks has since been finalized and approved by the Ministry of Finance.The names of the Collectorates and the names of the public sector banksselected for handling the work relating to each Collectorate are indicatedin Annexure I.

S. Procedure of Receipts: The revised scheme will be introduced witheffect from 1st April 1986 from which date payments of all dues and chargesunder the Major Heads relating to Central Excise, Customs, Gold Control andother allied heads, except those on account of Customs Duties and othercharges pertaining to the Collectorates of Customs at the Major Ports, willbe made only in the branches of the public sector bank selected for theCollectorate, by means of cash or cheque or draft, along with a challan inform TR-6. Each assessee will present to the branch of the bank authorizedto receive the tax dues in the Collectorate the challan for payment of duesunder each Major Head of Account. The challan should be correctly filledin all respects so that the revenue is credited to the proper head ofaccount. The detailed procedure for receiving the dues and theiraccounting will be similar to the one which is being followed presently by

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the banks in accordance with the Memorandum of Instructions issued by RBIln 1977, as amended from time to time. However, with a view tofacilitating the work, the procedure is reproduced below:

i. The receiving clerk or teller of the receiving branch willscrutinize the challan to see that the proper form has beenused and has been presented in quadruplicate; that all thecolumns of the challan which are required to be completed bythe ssessee, have boen filled in and that th assessee'ssignature, full name and addross and the date of payment havebeen furnished therein. As a result of introduction ofcomputerization for accounting of Central Excise revenue bythe PAOs of the C8EC, the assessees are required to print thechallans for Major Head '038' with all the codes prescribedby the CBEC and it should be ensured by the receiving branchthat only preprinted challans incorporating all the relevantcodes are accepted in respect of Central ExciseCollectorates, that each challan includes the amountscreditable to one Major Head of account only and relates toonly one commodity; that whore the payment is made bycheque/demand draft, the same has been drawn or endorsed infavor of the PAO of the Collectorate of Central Excise andCustoms concerned; and that particulars of the cash or chequeor draft are entered on the reverse of the challan.

NOTE: In the case of Central Excise duties on matches required tobe paid in the shape of match excise banderolls, theassessees should prepare the challans in quintuplicates.

ii. After scrutinizing the challan and satisfying himself thatthe amount of cash, cheque or draft tendered agrees with theamount shown in the challan, the receiving counter-clerk orteller of the branch will issue a paper token to the assesseeto facilitate delivery of the receipted challan to him. Inthe case of challans deposited with cheque or draft, thereceipted challan will be issued only on realization of theamount of the oheque or draft and hence the counter-clerkwill indicate on the token the date on which the receiptedcopies of the challan will be made available for delivery tothe assessees.

Paper tokens of different colors, serially numbered, may bousod for tenderers of cash, cheques or drafts, as the casemay be.

NOE: As indicated at (i) above, the pre-printed challan for theMajor Head '038' incorporate the various codes prescribed forcomputerization, including code for the receiving branch. Asbanks nominated under the earlier scheme would have beeneliminated, the receiving branch may ensure that theassessees have revised the code of the receiving branch onthe pre-printed challan; and where this has not been done,the receiving branch itself will incorporate its correct codeand may advise the assessees to modify the challanaccordingly, in future.

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iii. The token number will be recorded at the time of its issue onthe copies of the c1hallan to facilitate delivery of thereceipted copies of the challans to the assessees. Theduplicate and triplicate copies of the receipted challanswill be returned to the assessees and the remaining twocopies of the challans (i.e., original and quadruplicate)will be retained by the receiving branch for disposal asindicated in sub-paragraph (vi' below:

iv. All copies of the challan will be branded with suitablereceipt stamp showing the name of the bank branch and thedate of receipt of cash/realization of cheque or demanddraft. Care must be taken to ensure that the impression ofthe receipt stamp containing the name of the branch is clearand legible.

v. All receipts of dues and other charges will be entered in areceipt scroll in triplicate in the form set out in AnnexureII, with separate columns 'or cash, transfer and clearing. Aseparate scroll will be prepared for each Major Head. Theserial number of the entry of the item in the scroll will berecorded in the right hand top corner of the challan (thesame number appearing on all copies of a challan) tofacilitate identification and future reference. Each day'sscrolls will also be given a running serial number separatelyfor each Major Head, prefixed by the numeral denoting theMajor Head of Account namely, 037, 038, 045, etc. for thefinancial year from 1st April to 31st March to facilitatedetection of any omission in submitting the daily scrolls.An authorized official of the branch will check the scrollsand sign in full the duplicate and triplicate copies of thechallans in token of having received the amounts and initialthe remaining copies meant for use in the Collectorate. Thereceipted challans will thereafter be handed over to thecounter-clerk for delivery to the assessees against surrenderof the tokens. The scrolls will be totalled at the close ofbusiness every day by the receiving branch concerned and thebooks of the branch balanced for the day with reference tothe totals of the day's scrolls and other transactions of thebranch.

vi. At the beginning of the next working day, the receivingbranch will forward to its focal point branch at theheadquarters of the Col'ectorate, the following documentsunder the cover of a forwarding letter as in Annexure II-A.

a. the original copies of the scrolls with theoriginal copies of the challans attached in theserial order in which they are entered in thescrolls, arranged Major Head-wise;

b. duplicate copies of the scrolls (without challansattached) arranged Major Headwise; and

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c. quadruplicate copies of the challans stitched inthe order in which they aro entered in the scrolls,arranged Major Read-wise.

Local branches and branches in contiguous areas will send these documentsto tho focal point branch through courier system, while the outstationbranches will sond the documonts by registerod post.

The receiving branch will also transfer the total amount indicatedin the scrolls to the focal point branch through the usual inter-branchaccounting procedure of tho bank concerned.

The tr_licate copies of the scrolls will be retained by thereceiving branch for its record.

6. Functions of focal point branch: The focal point branch will, inaddition to acting as a receiving branch as at present, be responsible forprompt and accurate accounting of the collections reported to it daily byall the receiving branches under the jurisdiction of the Collectorate(including its own receipts). Since the receipts of the entireCollectorate will be accounted for through the single focal point, anydelay on the part of che focal point branch in rendering the main scrollsand the documents to local PAO will have serious financial implications forthe Government. It is, therefore, necessary co ensure that the b:rachconcerned has the requisite adequate and trained staff complement andsuitable infrastructure facility for discharging the responsibility of afocal point branch. In particular it needs to be ensured that in nocircumstances the scrolls and other documents are held up due to anyadministrative and other difficulties. For this purpose, it will beadvisable to constitute an independent cell under the charge of aresponsilil. official to deal exclusively with the focal pointresponsibilities as distinct from the day-to-day receipt/paymenttransactions of the branch. The focal point branch should preferably belocated closo to the PAO of the Collectorate.

On receipt from the receiving branches of the two copies of thescrolls and the two sets of challans (the original copies of challans beingattached to tho original copy of the scroll), the accounting cell in thefocal point branch will take the following action on a day-to-day basis:

(a) ascortain whether the amount of remittance received by itthrough the inter-branch account tallies with the depositsmade by the assessess as per tho challans and also as shownin the scrolls/forwarding letter. It will also scrutinizethe scrolls and enclosures to ensure that all challans havebeen attached and the sum total of the amounts entered in thescrolls and the challans tally;

(b) send an acknowledgement to the receiving branches for therecords and documents received by it (perforated portion ofthe forwarding letter Annexure IIA);

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(c) check that the scrolls from each branch are received inse.rlal order, by referring to the number of the previousscrolls roceived. With a viev to ensuring the recelpt of allthe scrolls from the receLiing branches, the focal pointbranch will maintain a suicable record for each financialyear systematically, sepa'!tely in respect of each receivingbranch, for noting and .ol1ow-up of the scrolls not receivedand other details;

(d) consolldate the duplicate copies of the scrolls (withoutchallans) received from all the branches, by stitching thescrolls together, Major Head-wise and retaining the stitchedset (copy) for its record;

(e) consolidate and stitch, Major Head-wise, the original copiesof the scrolls and original copies of the challans receivedfrom all the receiving branches; consolidate Major Head-wisethe quadruplicate copies of the challans;

(f) the focal point branch will also stamp each of the two coplesof the challans with the legend "Credited to GovernmentAccount" with its date stamp at the space provided;

(g) it will include these transactions in its daily main scrollsto be prepared in triplicate and Major Head-wise (in the formas in Annexure III) and send the original and duplicatecopies of the main scrolls to the PAO of the Collectorate ona day-to-day basis itong with the original scrolls andchallans received from all the receiving branches. Likewise,the quadruplicate copies of the challans will be arrangedMajor Head-wise and Range-wise and sent to the nominatedRange Officer or the Superintendent, Customs, as the case maybe, at that centre with a covering memo indicating the totalnumber of challans and the total amount of those challans.(No copies of scrolls will be sent to these officials. Thenames and addresses of the nominated Range Officers may beascertained from the Collector and kept on record);

(h) on receipt of the coples of the main scrolls and thesupporting documents, the PAO of the Collectorate, willcertify and return the duplicate copies of the main scrollsto the focal point branch, after proper verification;

(i) the mistakes/discrepancies polnted out by the PAO will berectified by the focal point branch after proper verificationthrough error scrolls, where necessary, in accordance withthe procedure prescribed by RBI in this regard;

(j) the triplicate copies of each day's main scrolls will be kepton record by the focal point branch along with the duplicatecopies of the branch scrolls referred to at (d) above.

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7. Receipts by the departmental treasury: The departmentaltreasuries existing in the Central Excise Collectorates at Bombay, Calcuttaand Delhi will contlnue to receive the revenues as at present. Theassessees will use challans in form TR-6 as has been prescribed for paymentof revenue in the public sector banks. These receipts will be consolidatedby the departmental treasuries and degosited with the focal noint branchalong with challans for the consolidated amount under each Major Head,rhes& consolidated challans will be oreoared in triplicate only. segaratesets of consolidated challans being pregared for cash and chgeajzes/drfts.In the case of receipts by cheques, the consolldated challan will also beaccompanied by a statement in triplicate prepared by the departmentaltreasury drawee-bank-wise and Major Head-wise. After verlfying that thecorrect number of cheques for the amounts mentioned in the Pcatements hasbeen received, the triplicate gel= of the statement duly seigd will bereturned by the focal point branch to the departmental treasury. mhduplicate conies of the recei2ted challans along with the duplicate copiesof the statements in the case of receipts by cheques duly certlfied forhaving collected the proceeds of the cheques will also be returned to the,dpartmental treasury by the focal point branch. In case any of thecheques mentioned in the statement is dishonored, necessary remarks will bemade in the statemen against the entry and the total amount in therelative ctallan corrected and the dishonored cheque returned to thedepartmental treasury against acknowledgement. The subsequent procedure inrespect of such receipts from the departmental treasuries will be the sameas described in paragraph 9 above.

Refunds of Revenue

8. One branch of the selected bank located at each of the divisionalheadguarters of the Collectorate will be selected for the purpose of makinggaMents of refunds on cheaues issued by the Divisional Officer forrefunds rebates and drawbacks. The PAO of the Collectorate will furnishthe specimen signature of the Drawing Officer to the selected branchauthorized to make the refund payments. The cheque books and the chequeleaves used for this purpose will be marked by the Drawing Officer 'Re-enueRefunds and Rebates' with a rubber stamp. The cheque issued will becrossed and marked 'Account Payee'. The cheques will be honored by theconcerned branches (if in order), who will prepare separate payment scrolls(marked Refunds, rebates and drawbacks) Major Head-wise and inquadruplicate in the form Annexure IV. (The particulars of Major Head willbe shown by the Drawing Officer on the reverse of each cheque). The serialnumber of each entry in the scroll will be recorded by the paying branch onthe corresponding cheque for the purpose of identification. Separateserial numbers, Major Head-wise, for each flnancial year will be given tothe scrolls to facilitate detection of any omissior. in submitting the dailyscrolls. The scrolls will be totalled after the close of business everyday by the paying branch and the books of the branch will be balanced forthe day with reference to the totals of the day's scrolls.

9. Two copies of the daily scrolls along with paid cheques will besent by the paying branch to the focal point branch at the headquarters ofthe Collectorate daily by courier system, where possible, or by registeredpost. The amount of payments will be transferred to the focal point branchthrough inter-branch account.

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The triplicato coPY of *4ch scroll will bo sent by the payingbranch to the Divisional Officer and the quadruplicate copy will be keptfor the record of the branch.

10. On receipt of the triplicate copy of the scroll, the DrawingOfficer wlll check each payment recorded therein with the cash bookmintained by him, (in which all cheques issued are recorded) and reconcilediscrepancies with the paying branch under advice to the PAO.

11. On receipt of the payment scrolls from the branches, the focalpoint branch will scrutinize the scrolls to ensure that they are completeand accompanied by all the paid cheques in respect of the refunds. Theamounts entered in the scrolls will be tallied with the amounts of thecheques to ensure that the documents sent by the paying branches arecorrect and complete. The total of the days scrolls will also be talliedwith the amount transferred through inter-branch account. A soparate mainpayment scroll in the form Annexure V will thereafter be prepared by thefocal point branch in triplicate Major Head-wise and two copies thereof(original accompanied by the copies of the branch scrolls with paidcheques) will be sent to the PAO every dy. The PAO will return to thefocal point branch the duplicate copy of each scroll after verification.The mistakes pointed out by the PAD will be rectified by the focal pointbranch through error scrolls.

12. Settlement by focal point bra'ch vith Ul, CAI.% g!pwr: The focalpoint branch will maintain a register to record the daily receLpts andpayments reported to it by all the receiving branches under Major Heads ofaccount. The register will be prepared from the totals of the dily mainscrolls and will be in the form Annexure VI.

13. On the basis of the entries appearing in the daily sutmarymaintained in form Anuexure VI, the focal point b.anch will prepare a dailymemo in Annexure VII and send it on a daily basis to tL_lU& cell atNagpur which will make daily settlement with the RI. CAS, Nagpur. T thnsc rn9.iwe is Rs. 1 lakh or above, the advico may be sent by telex ortelegram. The daily memo will bo preparod by the focal point branch induplicate and serially numbered for each financial year. A nil memo willbe sent by the focal point branch on any day for which there are no itemsfor settlement. The link call of the bank at Nagpur will monitor dailyroceipts and check accuracy of the daily memos received from focal pointbranch with which it is concerned. ( -vn under the revisad schm. one

lubie sector bank may be concernad with more than one Collectorata andhance the link call of that bank maw have to deal with more than one focalgSntjbrncjhes). The link cell at Nagpur will also maintain a Day Book inform Annexure VIII containing Major Head-wise summary of the daily amountsput through by the link cell to ths RUI CAS, Nagpur.

Monhl Atn.-ment

14. The focal polnt braich will render by the 4th of the followingmonth, monthly statements (in quLntuplicate) LndLcating datoewise thereceipts and payments (in forms Annexures IX & X) reported to the PAOthrough daily main scrolls and settled with the RBI, CAS, Nagpur throughits link call at Nagpur. These statemonts should be checked and verifiedto the extont possible, by the focal point branch with the certified copies

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of the daily scrolls returned to it by the PAO so that the discrepanciesmay be avoided. The focal point branch will send the original copy to thelink cell at Nagpur and three copies each of the monthly statements to thePAO who will verify them with reference to the daily scrolls and totals andsettle the discrepancies, if any, with the focal point branch. Thereafter,the PAO will return a copy of the verified statement to the focal pointbranch. The PAO will send another copy of the verified statement to theChief Controller of Accounts (CCA), CBEC, and koep the third copy as hisoffice copy.

The mistakes or discrepancies pointed out by the PAO will berectified by the focal point branch through the monthly statement of thesubsequent month and implications, if any, will also be advised to its linkcell for settlement with the RIB, CAS, Nagpur.

Adjustments in accounts of the PAO and CCA, CBSC

15. The PAO will adjust the revenue receipts and refunds in hisaccount under the concerned heads of account by contra entries to the Head"PSB Suspense-Bank X -- (Name of the concerned bank)." The PAO willmaintain a separate Register of Public Sector Bank Suspense for the bankconcerned with the work of Revenue Accounts (form of Register preseribed inthe Civil Accounts Manual) and post therein each day's receipts andpayments, as per the daily main receipt and payment scrolls received fromthe focal point branch. (Obviously this Register will have to be differentfrom the Register of Public Sector Bank Suspense, kept for dealing with theExpenditure Account transactions). The PAO will tally the monthly grossreceipts/payments worked out in this Register with the gross amounts shownin the monthly statements of receipts and payments sent by the focal pointbranch and record a certificate in the Register. Thereafter, the PAO shalltake the figures of receipts and payments for each month to the accounthead "858-Suspense Accounts-Public Sector Bank Suspense -- Bank X (name ofthe bank)" on the appropriate side of his compiled monthly account -- i.e.,debit and credit sides respectively.

16. The link cell at Nagpur of the nominated bank for eachCollectorate will, on the basis of the Day Book maintained by it, prepareby the 10th of the following month, statements (Annexures IX & X) ofreceipts & payments in respect of each PAO (i.e., Collectorate) putthrough, to the RBI, CAS, Nagpur during the previous month. The statementwill be prepared in quadruplicate.

In the case of public sector banks which are dealing with thetransactions of more than one Collectorate (say, Bank of Baroda, PunjabNational Bank), in addition to the above monthly statements, the link cellwill prepare a monthly summary of the aggregate amounts put through, inrespect of all the Collectorates, in the forms Annexures XI & XII (inquadruplicate). The monthly statements will be got verified by the RBI,CAS, Nagpur and a copy furnished to the latter. One copy of this statementwill be sent by the link cell to the focal point branch (for check andsettlement of discrepancies) and another copy to the PAO direct forverification at his end. The PAO will have the discrepancies settled bythe focal point branch.

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17. The copy of the monthly statement of link cell and summaries(where applicable) as verified by the RBI, CAS, Nagpur will be sent by thelatter to the CCA, CBEC, New Delhi by the 20th of the month following themonth of account (i.e., month to which the statement pertains). On receiptof this statement, the CCA, CBEC will clear the head 'PSB Suspense-Bank X'by transfer to the head "RBI Deposits'.

Custom House at Maior Ports

18. The various types of revenue receipts under the Major Head withwhich the Collectorates of Customs at major ports are concerned are'037-Customs' '045-Other Taxes and Duties on commodities and services --Foreign Travel Tax' and '047-Cold (Control) Act, 1968'. The Custom Housesat the major ports at Bombay, Calcutta, Madras, Cochin, Visakhapatnam,Kandla and Goa have departmental treasuries ('receiving' only at placesother than Bombay, Calcutta and Goa). Since the departmental treasuries atthese major Custom Houses are located in tbs Custom Houses themselves andsince the Customs documentations are completed for the purpose ofassessment in Custom Houses, assessees prefer to pay customs revenue in thedepartmental treasuries.

19. The facility of payment of customs revenue pertaining to the MajorCustom Houses at these ports in the publ,c sector banks will not beavailable to assessees since it will be more convenient for them to paytheir dues in the departmental treasuries. These departmental treasurieswill continue to collect customs revenue as hitherto and the public sectorbanks at these centres will not be permitted to receive customs revenuerelating to these Custom Houses.

20. The same procedure as laid down earlier for grant of refunds willbe followed in the matter of grant of refunds and drawbacks at these CustomHouses also. The departmental treasuries will also follow the sameprocedure as p. escribed earlier for treasuries at the Central ExciseCollectorate headquarters in the matter of remitting the cash or cheques ordemand drafts received to the focal point branch.

21. The RBT offices at Bombay, Calcutta and Madras will continue tofunction as focal point branches for the Custom Houses located there. Thebranches of the SBI nominated at present, will continue as focal pointbranches for the Custom House treasuries at Cochin, Kandla, Visakhapatnamand Goa.

NOTE: The existing arrangements for collection of Customs duties atairport complexes will continue and the nominated public sectorbanks will make suitable sub-agency arrangements for the purpose,if necessary.

Narcotics Commission:

22. In this organization the revenue that accrues to the Undertakingsat Ghazipur and Neemuch is through sale proceeds of opium and accounted forunder the Major Head '120-Industries'. The mode of realization of saleproceeds is that 90% of the value rf opium is realized immediately onshipment through letter of credit opened by the foreign buyers in scheduledbanks, while the balance payment of 10% is made on the receipt of thereport of analytical test as to the morphine content. The amounts realized

1asll #3 app 17b: Gupta: 9-2-87:pp

- 108 -

are deposited in the RPI, New Delhi along with a challan in form TR.6indicating th particulars of the factory on whose account the amount iscredited. The RBI, Now Delhi will settle these items through drafts sentdirectly to the concerned PAO of the Narcotics Dopt. or Opium factory. Thesale proceeds may also be deposited in the branches of the SBI who willmottle the transactions with tha Accounts Officers of these factories aswell as the Narcoties Commission's office.

23. As regards recovery of cost of alkaloids and medicinal opiuisupplied to various Pharmacists in genoral, the amunt vill be croditedalong with a challan under the appropriate head of account in one of thebranches of the SBI at the place of the factory concerned. Regarding therocovery of value of medieal opium supplied to States for oral consumptionby registered opium addicts, the sale proceeds will be rcovered by thefactories from the States concerned by cheque or demand draft.

24. From tho Statement at Annexure I, it will be observed that SBI hasbeen allocated the work of handllng the rovonue accounts of thoCollectorates of Central Exciso and Customs at Goa, Guntur, Kanpur,Madurai, Nagpur, Patna, Aurangabad. Shillong and Calcutta-I1. Specifiedbranches of i31 are presently functioning as focal point branches for theseColloctorates. However, with effect from 1st April 1986, State Bank ofIndia will also nominate ori specified branch at the headquarters of eachCollectorate (allotted to it) to function as focal point branch for thatCollectorate. Likewise, receipt/refund under the revised procedure will beundertaken at solected branches in each of these Colloectorates as in thecase of other banks. The present arrangement of reporting the receipts andrefunds through the GAS, lOAs Department, Uorli, Bombay, will, however,contlnue. The GAS, IOAs Department, Bombay will pass on the aggregatereceipts/refunds reported by the focal point branches daily directly to the1BI, CAS, Nagpur instead of routing them through their UNALO, New Delhl andRBI, New Delhi. For thls purpose the GAS, lOAs Department, SBI, Bombay mayfollow the present procedure autatis autandis.

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Chapter 4: INDIRECT TAXATION: ESTIMATING }VN AND INCIDENCE

4.1 The need to raise the revenue to GDP ratio in the face ofincreasing developmental expenditures without adverse consequences fcrequity is an important problem in Bangladesh. Furthermore, given theexisting structure, much of the increase in the foreseeable future isexpected to come from indirect taxation. The mission has therefore paidcareful attention to calculating the effects of its indirect tax proposalson revenue and their incidence on different socio-economic groups. The textof this chapter uses an example to highlight the considerations taken intoaccount in arriving at that assessment. Appendices 4.1 and 4.2 provide aformal statement and detailed documentation of that framework in order to

! facilitate replicability and, if required, help in the creation of ai capability to analyze indirect tax proposals on a continuing basis.

Appendix 4.3 shows how the framework can be used to address questions of* revenue and income distribution. Notwithstanding the presentation of all

technical material in the appendices, the text of this chapter isnecessarily more pedagogic in tone than the rest of the report. This is an

i unavoidable consequence of the need to describe the different effects whichthe mission has taken into account in formulating its recommendations.However, readers interested in policy recommendations alone may proceed toChapter 5 without loss of continuity.

4.2 The framework used by the mission has been designed to capture thefollowing interactions that may be appreciated via an example. Consider aproposal to double the excise tax on natural gas. Since the level ofaggregation of the data, as described in Appendix 4.2, does not permitnatural gas to be separated from electricity, a doubling of the excise taxrate on natural gas implies raising the rate applying to the electricity andgas sector by approximately 18 percent. A naive attempt at calculatingrevenue would multiply the 18 percent increase by the quantity of gas sold,a procedure that would raise an additional Tk 1336 million at 1984/85prices. But such an estimate can overestimate the true impact of the tax,for reasons described below.

4.3 A more refined and widely used revenue estimate may be obtained bytaking into account the reduction in demand by consumers as well asindustrial users of electricity and gas arising from the 18 percent priceincrease. This yields a figure of Tk 1297 million. However, this continuesto ignore a number of potentially important effects for the followingreasons.

4.4 First, the tax increase not only raises the price of electricityand gas, but also the costs of intermediates to other sectors of theeconomy. Those costs rise by 2 percent in wheat production, 3 percent incotton yarn production, 1 percent in jute textiles, paper production,education, trade and other services, 4 percent in fertilizer production and5 percent in the electricity and gas sector. Since intermediates howeverform only a fraction of total costs, market prices in those sectors increaseby a smaller proportion than the rise in intermediate costs: less than 1percent in most sectors, 1.5 percent in cotton yarn and 1 percent infertilizer. The tax increase causes a 19.5 percent increase in the marketprice for electricity and gas, with the excess over the original 18 percent

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occurring because of tax-induced increases in the price of intermediates andalso of primary inputs whose prices rise following attempts to use more ofthem in place of more expensive intermediates. This further confirms theobservation of Chapter 2 that such cascading, in which intermediate goodstaxation is reflected in the price of final goods, is important in practicein Bangladesh. The revenue estimation framework explicitly takes sucheffects into account.

4.5 Second, the direct and cascading-induced increases in marketprices, together with changes in incomes described below, generate almost a1 percent drop in private consumption in most sectors, around 2 percent inthe cloth and jute textile producing sectors, and 17 percent in electricityand gas. The loss of competitiveness as a result of increases in marketprices also leads to a drop of roughly 0.5 percent in exports in mostsectors, and a 2 percent decline in the cloth and jute textile producingsectors.

4.6 The above description highlights the effect of changes in the taxbase induced by changes in tax-induced final prices. But, to the abovecatalogue, must be added the effects of taxation on production and factorremuneration as follows.

4.7 Third, the decrease in demand for intermediate uses as well asconsumption and exports leads to a reduction in production that is less than1 percent for most sectors, between 1 and 2 percent for wheat, raw cotton,cloth, fertilizer, pharmaceuticals and chemicals, petroleum products,electricity and gas, transport services, trade and other services, and over2 percent for raw jute and jute textile producing sectors.

4.8 Fourth, the above fall in production induces a reduction inemployment by 0.5 percent. However, as mentioned before, the higher cost ofintermediate inputs causes some sectors (viz., cotton yarn, fertilizer andelectricity and gas) to employ more labor, so that the real wage is reducedby only 0.1 percent with attendant changes in income and consumer demands.

4.9 Fifth, the fall in production cuts imports, an effect whichoutweighs the increased demands for imports induced by increased domesticprices, leading to a fall in CDST revenue.1

4.10 Consideration of the cascading, competitiveness and employmenteffects leads to a revenue estimate from the excise tax increase on naturalgas of Tk 1150 million. The difference between the "naive" estimate of Tk1336 million and the more widely used "refined" estimate of Tk 1297 millionon the one hand and the final estimate of Tk 1150 million on the other, isover 10 percent; this difference is lost during the adjustment of theeconomy to the new tax structure. Thus the framework developed by themission, by taking into account a more complete set of effects, helpsprevent optimistic expectations about the revenue gains from indirect taxrate increases.

1/ The description given has been chosen for ease of exposition and shouldnot be interpreted as describing a temporal chain of events correspondingto the order in which the various effects are listed.

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Soeio-Economic Incdene

4.11 A second motivation for capturing the full range of effects hasbeen to arrive at a judgment of how the burden of indirect tax rateincreases is distributed across different socio-economic groups. Asdiscussed above, an 18 percent increase in the excise tax on electricity andgas induces (1) a rise in the price of the electricity and gas; (2) a risein the price of other goods as a result of the cascading effects on sectorsthat use electricity and gas and (3) changes in income for those employed insectors where production levels change.

4.12 The cost of consumption increases 0.2 percent for all groups in theeconomy except for the urban formal population who witness an increase of0.4 percent. The difference is easily explained. The urban formalpopulation is the only group that has a significant consumption ofelectricity and gas. Were it not for the cascading effects, only this groupwould have been hit by the excise tax on gas. However the cascadingeffects, that are frequently neglected in less complete analyses of taxincidence, lead to price increases for other goods and cause all socio-economic groups to be affected by the tax change.

4.13 The cost of consumption however provides a partial picture of theincreased tax burden. An analysis of changes in production levels showsthat the reduction primarily takes place in sectors where rural low-incomegroups are employed. The sectors that witness an increase only employ urbanworkers. Combining these effects causes the incomes of the rural low-incomegroups to be reduced by 0.7 percent, whereas the reduction only amounts to0.2 percent for the urban work force. Thus, the cost-of-consumption and theincome measures point in different directions. The analysis of the missionsuggests that this is true for a number of sectors, e.g., petroleum, cloth,fertilizer, wood and other industries. (Full details are presented inAppendix 4.3) These considerations have been taken into account inassessing the distributional impact of the packages presented in Chapter 2.2

2/ Appendix 4.1 develops the point that supplies of primary inputs andprivate sector demands for goods and services are represented in waysthat err on the side of overemphasizing the negative distributionalimpact of various tax proposals on low-income groups. This choice ofbias is deliberate.

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APPEND-IX 4.1

The Revenue Estimation Nodel

The framework presented below uses a 35 sector general equilibriummodel. To analyze the effects of indirect tax rate changes, the modelshould ideally be highly disaggregated. However, the availability of dataand the desire to keep the model as simple as possible, without losing theessentials of the processes described in the text have suggested that anintermediate level of aggregation is appropriate. The 35 sectors in themodel represent a reasonable compromise between the 47 sectors of theBangladesh input-output table of 1976-77, the 39 commodity groups of theApplied General Equilibrium Model for the Third Five Year Plan, theHousehold Expenditure Surveys of 1981-82 and 1983-84, and the grouping ofdutiable and excisable products in the Bangladesh Fiscal Statistics, whichserve as the major data sources.

The revenue estimation model is described fully in this appendix.The simultaneous equations of the core model are followed by a statement ofthe incidence calculations.

The Simultaneous Core ModeL

Production and Prices

Each sector produces a specific commodity using intermediates and primaryinputs. The production structure in each sector can be represented by aproduction tree as shown in figure 1:

DomesticOutput (X)/ \

/\/\

Domestic ImportedInputs Intermediates (MQ)/ \

/ \/ \

/\Primary DomesticInput(V) Intermediate

Aggregate (Q)/ I nt \

Individual Intermediates

- 113 -

Starting from the bottom, the individual intermediates are used in fixedphysical proportions to form an intermediate aggregate which is combinedwith primary inputs under Cobb-Douglas technology to produce a domesticinput aggregate. This is combined with imported intermediates in fixedphysical proportions to produce gross domestic output. Below, thisstructure is formalized.

Each sector produces domestic output using a composite intermediate goodand a composite primary input, following a Cobb-Douglas technology. Let

Xi denote the volume of domestic output in sector i,

Qi denote the volume of composite intermediates in sector i,

Vi denote the volume of primary inputs in sector i,

Di denote the output elasticity of intermediates in sector i,

AX denote the scale factor of the production function.i

Then, the production function can be written,

(1) Xi - AX Qai v(-i)

It is assumed that the volume of intermediate imports is proportional tothe volume of domestic output, so letting

MQ denote the volume of intermediate imports, and

AQ denote the proportionality factor, we havei

(2) MQ - AQ Xi i i

Under the assumption that producers maximize profits, the first orderconditions for this objective are that each factor's marginal revenueproduct equals the rate of remuneration of this factor. Under the Cobb-Douglas technology, this is equivalent to saying that the total value ofthe input of each factor is a constant share of the value of output.Letting

-114 -

pli, denote the market prices of the composite intermediate,

denote the producer price of domestic outputs,

PQW denote the world price of imported intermediates,£

tQ denote the nominal tariff rate on imported intermediates,

PV denote the price of primary inputs,

the first order conditions can be written,

(3) PQ Qi a [P Xi x Pi (1 + tQ) MQ]

'4) PV Vi (1 [PXi x PQQ ( + tQ) M91

where (1 + tQ) is the domestic price of imported intermediates,

because the fixed exchange rate has been normalized to unity.

It is customary in such analysis to distinguish two broad groupsof factors, viz., labor and capital (and land in the agri--ultural sector).A number of skill classes of labor and different kinds of capital mayfurther be identified. Data availability in Bangladesh unfortunatelyrestricts the making of these distinctions. There are no data on sectoralcapital stocks or on the contribution of labor to value added in eachsector. For that reason the factor market has been modelled as a marketfor a single factor service. Note that the price of primary inputs, pVdoes not carry a sector subscript. This is because the assumption of acompetitive market for primary factors ensures a uniform rate of return tothose factors across sectors.

The market price of domestic output equals the producer price, marked up bythe excise tax rates, so letting

denote the market prices of domestic output, and

tt denote the excise tax rates,

the market prices can be written

(5) Pi - Pi (1 + ti)

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It is assumed that the all individual intermediates are combined via aLeontief technology to form the composite intermediate, Qi. This meansthat the price of the composite intermediate input is given by

(6) PQ - M AJ1P,ji

where A is the input-output coefficient matrix, normalized so that the sumof intermediate input coefficients sum to unity over columns.

Factor Suplies

The price of primary inputs is given by market clearing for theseinputs. Demand for the primary inputs is given by (4) above, and supply isassumed to feature constant elasticity. Thus, letting

VO denote the total base supply of primary inputs,

pC denote the consumer price index, and

* denote the primary factor supply elasticity,

the primary input market clearing can be written

(7) EVi - v 0,i p

Two polar views on the functioning of this market can beidentified. One view is that there is a constant supply of factor services(o - 0) and that these always get fully employed by adjustment of the wagerate. The other view is that the wage rate does not move, (O - a), so thatthere may be unemployment of primary factors. Both views are extreme. Theoccurrence of mass unemployment would most likely result in some adjustmentto the wage rate. Conversely, a reduction in the real wage rate would leadto some reduction in the supply of factor services. This chapter thereforechooses middle ground by assuming that there are some potential laborreserves and some underutilization of capital in Bangladesh and that thesupply of these factors does respond to movements in the real rate ofprimary factor remuneration. This should be seen as a convenient device toincorporate the stylized fact that when factor demand changes, there willbe some adjustment in the real wage ratel and some adjustment inemployment.

1/ For convenience, the term "real wage rate" is used to signify the realprice of value added since, as mentioned above, there is one market forfactor services.

- 116 -

The mission has experimented with other formulations, one in whichthe wage rate does not adjust, one where the wage rate bears all therequired adjustment, and one where in some sectors the wage rate is fixedwhile it is flexible in others. None of these radically changes theresults. The formulation chosen for the analysis has the advantage that iterrs on the conservative side both by biasing the revenue estimate downwardand by overemphasizing the negative distributional impact of various taxproposals on low-income groups. It is also the simpler and moretransparent formulation.

The Demnd Side

Investment and overnment ConsuM tion

The volume of total investment and government consumption areassumed to be exogeno< to the model. Real investment is exogenous to themodel for two reasons. First, the model is strictly stat'c, and there istherefore no appropriate way of describing investment behavior, which isinherently connected with dynamics. Second, the lack of data on capitalstocks makes it impossible to describe the need for additional capital.Thus, although changes to profitability incurred by indirect tax changesmay affect investment demand, no attempt has been made to quantify them.Similarly, public consumption is exogenous to the model. -t is thusassumed that any additional tax revenue is used exclusively to finance thegovernment deficit. Alternatively, it could have been assumed that thegovernment would respend all or part of its new revenue. While this mighthave been more realistic, it would have eliminated some of the revenuepessimism that has been deliberately incorporated into the model. To seethis, consider the extreme case where government respends all of itsadditional revenue. In that case, the imposition of indirect taxes impliesa redistribution of income from groups with relatively low marginalpropensity to consume (consumers) towards those with relatively highmarginal propensity to consume (the government), thus increasing totaldemand and production. This would augment the tax base and increaserevenue as a result of the redistribution alone. It may be mentioned thatalternative assumptions about government spending may be easilyincorporated into the model.

Private ConsumtLon

Private consumption follows from the assumption that therepresentative household maximizes a Cobb-Douglas utility function subjectto the budget constraint given by the assumption that the householdreceives all value-added. Some goods in Bangladesh are clearlynecessities, whereas others are luxuries, so in reality the reduction inconsumption demand cannot be proportional across goods. However, in theabsence of estimates regarding the extent to which each sector producesnecessities and luxuries, it was decided to opt for a symmetrical treatmentof all goods. Letting

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Ci denote the volume of private consumption of coDmodity i,

Y denote household income,

a denote the average-marginal propensity to save,

Pi denote consumer prices,

8i denote the marginal budget shares by commodity,

U denote consumer utility,

this can be formalized by the utility functior..

(8) U - nCoii i

the determination of household income,

(9) Y - Epvvi

and the first order condition for utility maximization:

(10) Pi Ci - 8i (1 - s) Y.

Thus, the value of consumption of each commodity is a constant share oftotal income less savings.

The Cobb-Douglas formulation is not necessarily revenue-pessimistic if it is primarily luxuries that are taxed. In that case, tbemodel will underestimate the reduction in the demand for these goods, andhence underestimate the reduction in the tax base. Nor is it necessarilyrevenue-optimistic. If necessities are more intensive in value added thanluxuries, the model will overestimate the reduction in consumers' incomeand thus eventually overestimate the reduction in private consumption andthe tax base. However, the chosen formulation, by overstating the priceresponsiveness of goods consumed by the poorer groups, tends to overstatethe negative distributional consequences of indirect taxation. Asmentioned before, the choice of erring in this direction is deliberate.

Expot Demand

The last component of final demand is export demand. Exportdemand can generally be expected to be responsive to price changes.Bangladesh faces two kinds of markets for its exports. First, it is aprice taker in a number of markets. Second, there are markets whereBangladeshi exports are significant and where the country has some marketpower. The latter set of markets can be described by assuming a downwardsloping export demand curve. Bangladesh may charge a higher price on these

- 118 -

markets than the going "world" price at the cost of losing some - but notall - of its export volume. In the former set of markets, the world priceis given and cannot be changed very much without losing almost all exports.In these markets, however, the Bangladeshi producer faces a choice ofwhether to export or to sell domestically. If the domestic price increasesrelative to the world price, the producer may choose to reduce ' nortsupply in favor of domestic sales. Although the two sets of markets alpearto be very different, the effect on export volume of a domestic priceincrease is very similar in both: a domestic price increase leads to adrop in the volume of exports. Thus exports are assumed to face downwardsloping constant elasticity world demand curves. The magnitude of thiseffect may be quite different for different products (even in the same kindof market), but again, not enough information is available to quantifythose differences. For simplicity, it is assumed that all export demandcurves have the same elasticity (-3). Letting

Ei denote the volme of exports of comodity I,

8°i denote the base volume of exports by commodity,

denote the base domestic world price of commodity i,

e denote the common export demand elasticity,

the export demand function can be written

FE 1 PI(11) -

EIorts

The volume of imports for final use is assumed to be proportional to the

volume of total final demand. Thus, letting

XF. denote the volume of final imports,I

Ai denote the proportionality factor,

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.i denote the volume of total investment, and

Gi denote the volume of government consumption,

final imports are given as

(12) (C i+ Ii +Gi +Ei)

Aggregate Demand and SUXD1l

Total supply is now given as X + Mi, and aggregate demand is given as

Ci + Ii + Gi + Ei plus the demand for intermediates. This, in turn, is

given by the previously mentioned assumption of Leontief technology for

intermediate uses, so the demand for intermediates is E AijQQ.

Therefore, the commodity market clearing conditions may be written as

(13)Xi +i AijQj + Ci 1+ I + G + E

This implicitly determines market clearing producer prices.

The final step in the core model is now to determine consumer prices. Bythe assumption in (12), consumer prices are a weighted average of domesticfinal import prices and domestic output market prices:

(14) P1 - (1 - Ai) Pi + AFpF (1 + t .

where Pi is the world price of final imports, andi

Fti is the tariff rate of final imports,

Fe Fso P4 (1 + t1 ) equals the domestic price of final imports.

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The consumer price index is finally calculated as the weighted average ofconsumer prices:

(15) pC - 2: Pici / ci i

This concludes the description of the simultaneous core model. It consistsof equations (1)-(15). Having solved the core model, government revenue,private, government, and foreign (and thus total) savings can be calculatedrecursively. By Walras' law, the savings-investment equality has beenomitted from the core mcdel, but it is easily checked (both numerically andanalytically) that this condition is satisfied.

Figure 4.1 provides a schematic description of the model. Thesigns on the arrows indicate the direction of changes. For example, theminus on the arrow from "Prices of Intermediates" to "Demand forIntermediates" indicates that if the intermediate prices increase, then thedemand for intermediates will decrease ceteris garibus. Similarly, theplus on the arrow from "Demand for Intermediates" to "Production" indicatesthat if the demand for intermediates increases, then, ceteris garibus,production will be increased. The figure serves to highlight theinterconnectedness of different parts of the model described above.

Socio-Economic Incidence

This section describes how the calculations of socio-economic incidencehave been carried out.

For any solution to the core model, the income of each of the 10 socio-economic groups can be calculated. The basic postulate is that the incomedistribution shares remain constant between equilibria, and that nominaltransfer incomes and income tax rates also remain constant. Letting

Bik denote the matrix of shares of value added in sector i that ispaid to socio-economic class k,

ytK denote the income tax rate by socio-economic class, and

wok denote transfer income by socio-economic class,

each class' disposable income, Ykd, is given by

(16) Yk - (1 - tk)[wk + E BikP Vi]i

It is assumed that each socio-economic class maximizes a Cobb-Douglasutility function subject to their respective budget constraints and aconstant average-marginal savings propensity. Thus letting

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Figure 4.1. The Model Structure

?udtzect ?az

uRndatesTzRae

Prices; of Me

It*rmedi1 Prices I L : es

l Fin~~~~~~~a Iwpert

l Demad toc Deton Final ImpactsIntermediates

I|Primary rl2m&ry| | |I||Factor | Factori i||||Supply | Dend |||+|

1+ +11

I -t+ l I

- 122 -

Zk denote per capita utility by class,

Dik denote per capita consumption by commodity and class,

uik denote marginal utilities by class, and

Sk denote savings propensities by class,

the utility functions may be written

(17)Z.k - Dikik

yielding the first order conditions for utility maximization that

(18) PiDik - likyk (1 s k)/Nk

where Nk is the number of persons in socio-economic class D. (18) may besubstituted into (17) to yield indirect utility functions. It is nowpossible to calculate the change in per capita utility levels associatedwith a particular change in taxation, by comparing the utility levels inthe base and the comparative static equilibrium. Also, it is possible toaggregate the utility levels into a social welfare measure. This is doneby

(19) w- 1 NkZ),

where W is the social welfare indicator, and

p is an indicator of social desire to enhance equality.

In (19), the parameter p can take on various values. For p-1, society isindifferent towards distributional consequences, and for p - -e, thesociety is Rawlsian: society is no better off than the worst off person insociety. For -- < i < 1, society attaches some weight to enhancingequality, but it is not the completely overriding concern. In theincidence computations, values of W are reported for p-l and for A--I. Bycomparing these values, it can be seen whether the tax policy has aregressive or a progressive socio-economic incidence.

Consumer Price Incidence by Income Class

In addition to the socio-economic incidence measures above, computations ofconsumer price incidence by income classes can be performed in thefollowing way. Let

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Hiy denote the share of consumption of commodity i by income class y.

Then a Laspeyerres consumer price index by income class can be computedstraightforward by

(20) CPIy -i Hiy Pi.iy

The CPI can then be compared between equilibria to see how a particular taxpolicy has affected the cost of living by income class.

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Appendlx II (continued)

Bangladesh Revenue Estimtiou Model

4 StT a INuT-OUT TARSL *mx 1s I

6 * ROMAN NUtUS SIM TO ro0-SCTR W I 1076-77 10-TABLE7 * ARABI NUMIER RIE TO IO-SEU UU IN PLAY AS RUN8

9 RICE CI 2)10 WHEAT 5SI 1)11 JUT (III 15)12 COTTON cIV 14)13 TEA (V 13)14 OTHCROPS OTHMl COpO (VI 3+10+11)15 LIVESTOC CViI 57-+15)

16 FISERIERS (Vill 12)17 FORESTRY cIX 10)18 suAR Cx 6)19 EDIBLEOIL (XI 4)20 TOWA=CCO TOBACO RUDUCTS (XIII 17)21 OTHFOOD SALT AND OT 000D 5XS- "XIV 9)22 COTTOUYARN (IV 1J)23 CLOTH XVI+XYII 20)24 JUTETEXT JUTE TEXTILE ZX(Vil 21)

25 PAPER 22)

26 LEAER CU 23)

27 FERTILIZER ( 24)

28 SHARM-CHE PASA OT CHICALS (UII+UIII 25)29 CEMENT (ClT 26)

30 BASIC-HET BASIC METALS Cov 27)31 METAL-PROD MAL ODUC MACtlUE AND TRNSU moIlT (CUVI-XUVlI 26)

32 WD-OTW WOOD AND HISCLANEOUS INDUSTRIES CX=+3+ 20)33 URB-BBLDG URBAN QOUSUILDIN CT 30)34 RUR-HILDG RURAL EWISEBUILDIIC (3=Y 31)35 OTH-COIST 0 CCSIRWTIO (XIaIT-VT 32)

36 PETROLU PETIM PRODOSTS 5YVT37 EL-GS ELECTRCTm AMD AS (11Y1T+XmE 33)38 TRP-SERV Tl3IRT SERICE (XL 34)

39 HOUSING HOUSTIN SUSICE (3.11 35)40 HEALTH 1 (XLSTT 36)41 EDUCATION (CUIV 37)

42 PUB-AUM PUBLIC AmnISRATION (XLV 38)43 TRAVE-OTH TRADE BANKING ISURAN AND 0! SERVIC (3.I+X.VI+XLVII 31)44 VALUE-ADD VALUE-ADU

45 EXCISE EXCISE TAX

46 DUTY CUSTOM DT ON INTiI&TE IMPOTS

47 SALES SALES TAX OF INTERMDiIATE DOOM48 INTDiM-IMP INTPXATE IHDTS8

49 TOT-CONS TOTAL CONSMrWTIO

50 INVEST INVESMUU

51 PUBLIC PUBLIC UPENDITURI

52 EXHOTS EXPOWT VALUE

- 125 -Set Definitions

53 Dom FINAL naS

54 CDIaL cUSTO DMuT O rimW IMPTS55 STFINAL SAS TAX CU FINL WRS56 STOCK STOCK CRAYGUS

57 TOTALI TOTAL n?EmUDiA usE

58 TOTAL2 TOTAL OUTPUT AT P1 1CR ICES

59 TOTAL t

6061 IcR) IN -ouTpuT SCTORS i62

63 RICE, wowA, JUTE, COTTON, TEA, OT:ROPS. LIVESTOCK

64 FISBIES. FORESTRY, SUGAR, EDIBLOIL, TOBACCO OTFD. COTTONYARN

65 CLOTH, JUTETUT, PAPER, LUT1A1, FERTILIZER, PSASW-CSEM, CEENT

66 BASIC-NET. HETAL-PROD. NOW-OT, URDM-UBLOG, RUR-EBLG. OTH-COIST. PETROLEIU

67 EL-GAS, TRP-S , OSIW8, HEALTH. EDUCATION. PUB-A. TRADE-T I

68

69 ALIA8 (R,C), (I.J)70

71 SET 1T(1) CMUB LY ANALYZED SECTOR ; IT(I) - NO

7273 SET GM DUTIALE IPOS /

74 MILK 1n CONDENSED AND PRESERVED

75 SPICES

76 TALLOW

77 EDIBIEOIL EDIBLE OILS

78 &OCOOUTOIL

79 SUGAR

80 BEVERAGES BEVERAGES SPIRITS ANID vnEG81 UNMANTOBA MDIANUFACTURED TOBACCO

82 TOBACPROD TOBACCO DUCTS

83 CEIST

84 COAL

85 COALTAR

86 PITCII-BIT PITCHII ND BITIDIEN

87 PETR-PROD PETROLEW4 PRODUCTS

88 CHEMICALS

89 PHARMAC PHARMACEUTICALS

90 PAINTS-ETC DYES COLORS PAINTS AND VARNISHES

91 PHOTO-CINE PHDTOGSAPHIC AD CC S

92 PLAST-MAT PLASTIC MATERIALS

93 RUBBER RUBBER AND ARTICLES

94 PULP-PAPER PULP PAPER AND PAPERBOARD

95 BOOKS-ETC BOOKS JOURNALS AND NEWSPRINT

96 SYRTS-FIBR MAN-MADE FIBRE AND YARN

97 SYNTR-FABR FABRICS 0F MN-MADE FIBRE

98 RAW-COTTON

99 COTTONYARN

100 COTTONFAIR COTTON FABICS

101 SECHANDCLO SECOD ND CLOTIG AND ACCESSORI

102 CERAMIC CERAMICS GLASS AID GLASSA

Set Definitions - 126 -

103 IRON-ST n STEEL AND PRODUCTS

104 METALS METALS OT TRA GOLD AND SILVER IRON AND STEEL

105 CUTLERY CUTLERY AID OTMR ARTICLES OF BSIC 4ETALS

106 MAINERY MACINRY AIPPLIANS A PRTS107 RILWAY RAILWAY LOCOICTrVES ROLLING STOC8S AND PARTS

108 MOTARS MOTOR CARS AND OTMER VEHICLES

109 AIRCRAFT IURCRAM AND PARTS

110 SHIPS SHIPS AND BOATS ETC

111 OTHERS

112 DEV-SURCH DEVELOPMD SURCHARGE

113 TOTAL /

114

115 GE ESISABULE PRUCTS IlE TOBACCO TOBACCO PRODUCTS (CIGARET - REG DUTY - BIRI ETC)

117 PETROLEUM PETRLEIM PETROLEUM OIL AND LUBRICANTS

118 GAS PEtlUM GAS

119 TEA

120 BEVERAGES BEVERAGES OIE THAW WINE

121 GLUCOSE GLUCOSE DEXTROSE ETC122 SUGAR

123 BISCUIT BISCUIT AND BREAD

124 CEMENT

125 PAINTS PAIRDS AND VARNISH

126 COSMETICS

127 SOAPS-ETC SOAPS AND DETERGENTS128 MATCHES

129 PLASTIC PLASTIC PRODUCTS

130 RUBBER RUBBER PRODUCTS

131 PAPER

132 PAPERBOARD

133 HANKCHEQUE

134 COTTONYARN

135 COTTORFABR COTTON FABRICS

136 SYTN IBR MAN-MADE FIBRES AND YARN

137 JUTE-MANUF JUTE MANUACTURES

138 WOOLYARN WCOLLEN YARN

139 WOOLFABR WO0LLE FABRICS

140 GLASS GLASS AND GLASSWARE

141 METALCONT METAL CONTAINERS

142 MILDSTEEL MILD STEEL PRODUCTS

143 BATTERIES ELECTRIC BATTERIES

144 BULBSTUBES ELECTRIC BULBS AND TUBES

145 FANS ELECTRIC FANS AND PARTS

146 CERAMICS CHINA WURE AND PORCELAIN WARE

147 WIRES WIRES AND CABLES

148 HOTELS HOTELS AND RETA8RANTS

149 GOLD-SILVR GOLD AND SILVER PRODUCTS

150 CINEMA CINEA AND ENTERTAINMENT

151 PACKMATER PACKAGING MATERIALS

152 BRICKS

- 127 -Set Definitions153 RADIO RADIO RECEIVING APPARATUS

154 VEHICLES HEC8UIZED VEHICLES

155 SBOES

156 oIND WOOWEN FURNITURE

157 MSDICINE MEDICINE AND MEDICIN PRODUCTS158 PESTICIDE ANTISEPTIC DISINFECTANT INSECTICIDE PESTICIDE ETC159 ELECTRODE HIDING ZLECTRES

160 STEEL-CUTL STAINLESS STEEL INCLUDING CUTLERY

161 PIPES STEEL PIPE AND GI PIPE162 OXYGE aXYGEN CARBON OXIDE ETC

163 SODIUMSILI SODIUM SILICATE164 GLYCERINE

165 TELEPHONE TEL.EPIINE AND TELEPRINTER SERVICE

166 PLASTICBHG

167 INSULBOARD INSUIATIon BOARDS168 NUTS-BOLTS NUTS BOLTS SCREWS

169 ELG00DS ELECTRIC GOODS AND FITTINGS170 CINEKAFIIM CINUIATOGRAPC FILM171 SANITARY SANITARY WARE AND GLAZED TILES172 LICUOR-ETC LIQUR AND RACCPrICS173 MISCELL MISCELLANEOUS174 TOTAL I175

176 GMI(GM.I) UAPING BETWEN DUTIABLE IMPORTS AND 10 I177 (SPICES, TALLONW) OTOPS178 (MILK. BEVERAGES) .OTHFOOD179 (EDIBLEOIL. COCQIUTOIL) .EDIRLE0IL180 SUGAR SUGAR181 (UNMANTOBA. TOBACPROD) .TOBACCO182 CEMENT .CET183 PETR-PROD .PETROEUM184 (COAL, COALTR. PITCH-BIT. IRON-STEEL. METALS) .ASIC-M185 (CUCALS, PUARMAC. PAITS-ETC) .PRARM-CHEM186 (PULP-PAPER,BOOKS-ETC) PAPER187 RAW-COTTON .tOTTON188 (SYNTH-FIBR,tCfOTOYARN) COTTtNYARN189 (SYNTH-FABR.COTTOQfFAR,SECHANDCLO) .CLOT8190 (CUTLERY, MACHINY, RAIIAMY, NDTORCARS, UAIRcAFT. SHIPS).METAL-PROD191 (PHOTO-CINE,PLAST-M. RUBBER, CERAMIC, OTHERS) .WOOD-OTH /192

193 GXICGX,I) MAPPIG BETWEEN EXCISABLE ITEMS AND 10/

194 TOBACCO .TORAC

195 PETROLEM PETROLEUM

16 GAS .L-GAS

197 TEA .TEA

198 (BEVERAGES, BISCUIT. LIQUQR-ETC).OTHFOOD

199 (GLUCOSE, SUGR) .SUGAR

200 CEHNIT .CElENT

201 MEDICINtE PAUM-

202 (PAIS, COSIICS, SOA8 -ETC, MATCHES, PLASTIC, RUBBER

- 128 -

Set Definitions203 GLASS. DATTUE, DUULUMST , FAIS, CERAMIC. RADIO

204 SHOZS. tQVUR. ICKxS, amN, SODXIUZLI, OGLUIIE

205 PLTICAG, INSULOAD ELGMS, CImIAL, SAITAR. MIScEL).IO-OTH206 TELEPHONE .TRP-SEV

207 (PAMPE. PAPUSRD, A BAfCHQU, PACSTR) .PAPER

208 PESTICIDE FERTILIZER

209 COTTONYARN .COTO

210 (COTONFrA1R, WOMLABR, SYIIIIIR. IW0LYRIN) .CLOTH

211 JUTE-MARUF .JUTSET

212 (MILDSTEEL, GOLD-SILUR, USTALCOT, WIRES, VEHICS, ELECTRODE

213 STEEL-CUTL, PIPES, IUTS-XOLTS).htTAL-PROD

214 (HOTELS, CItQ) .RADE-01 I

215216 SET SC SOCIO-ECoCNCIC CLASSES I

217

218 LANDLESS RURL LANESS

219 SHALL SHALL F?A*2_S

220 HEDIUM-T HEDIU SIZED FHASS - TEANTS

221 MEDIUM-O FEDIUH SIZED FAWMES - OSRERS

222 LARGE LARGE FARMERS

223 LARGEST LARGEST FAMNERS

224 RtJR-IF RURAL IN14AL SECTOR

225 RUR-FOR RURAL FORHL s8CTOR

226 URB-INF URBAN IU1MW.L SECTOR

227 URE-FOR URBAN FORML SECTR I

228

229 ALIS (SC SCA)

230

231 SET U AREA I URUAN, RURAL, EURGLADESB I

232 K INLY HOlSHOD INCOME MOU (TA) I

233 0-300, 300-399, 400-499, 500-749, ?50-999

234 1000-1249, 1250-1499, 1500-1999, 2000-2499, 2500-2999

235 3000-3999, 4000-4909, 5000-5999, 6000- AVERASE /

236

Data Tables - 129 -238239 TALS IO(R.C) 1984-OS IUIUTPUT TAUS IOR DUGLADS (MIL. TAXA)240

241 RICE AT JUTE COTTON TEA OTUCROPS LIVESTOCK FISMMES

242

243 RICE 6344.31 1651.58

244 WHEAT 440.40 27.71

245 JUTE 21.64 150.83

246 COTTON 151.36

247 TEA 5.24248 OTHCROPS 1320.27 251.22

249 LIVESTOCK 4117.15 245.14 153.55 34.38 520.64

250 FISHERIES 0..45

251 FORESTRY 264.11 19.81 12.99 1.59 2.80 65.78 4.72 193.97

252 SUGAR 3.35

253 EDIBLEOIL 22.762514 OTHFOD 157.46

255 CLOTH 22.23

256 JUTETEXT 264.25 26.68 0.26 0.37 1.15 67.22

257 PAPER 3.90 24.15

258 FERTILIZE 6712.83 556.21 52.13 18.84 30.60 464.46

259 PHARM-CUEM 389.36 32.55 1.46 1.80 6.76 30.06 . 141.33

260 BASIC-NET 0.60

261 METAL-PROD 382.39 45.74 3.71 4.76 4.65 12.57 2.63 134.35

262 W0OD-OTB 450.10 50.15 4.85 147.61 8.24 298.54263 OTE-COUST 307.09 2.09

264 PETROLEM 1059.77 110.13 8.84 0.77 49.57 11.02 30.53265 EL-GAS 349.25 303.16 5.83 3.74 5.30 0.18 21.61 10.19

266 TRP-SERV 4831.09 399.27 236.08 57.02 84.34 3347.04 1281.90 2364.94

267 PUB-ADM 149.97 25.32 6.61 1.12 1.58 51.74 1.23 0.92

268 TDE-OSH 14220.44 1295.01 861.20 144.18 595.84 8487.06 3978.75 7415.68269 VALUE-ADD 86893.67 4316.78 4635.66 202.29 466.02 23971.58 5200.30 12588.91270 EXCISE 35.40

271 DUTY 240.00 51.66

272 SALES 0.70 30.98

273 INTERM-IMP 369.85 642.04 2716.70 187.80 3.54

274

275

276 + FORESTRY SUAR EDIBLEOIL TOBACCO OTSO0D COTTOSUARN CLOTH JUTETET

277

278 WEAT 0.50 683.00

279 JUTE 4126.97

280 COTTON 1982.23

281 OTECROPS 2343.87 3467.55 669.55 22.76282 LVESTOCK 34.71

283 FORESTRY 3.63 12.22 46.30 3.00

284 SUGAR 466.09

285 EDI8I.EOI 11.58 706.43

286 TOBACCO 8.23

287 OTIO0D 58.71 49.15

- 130 -

Data Tables288 CoTTONTARI 6588.21 14.63

285 CLOTH 811.00

290 JUTETIXT 0.64 15.69 0.04 0.02 0.00 6.35 2.91 49.99

291 PAPER 5.29 172.72 3.98 28.17 156.46 20.51

202 LEATHR 27.12 16.60293 PA-CHEIEM 0.41 14.22 16.07 4.12 7.33 35.61 053.38 21.25

294 BASIC-MET 66.33 0.64

295 METAL-PROD 3.20 6.23 23.47 1.88 0.48 15.02 37.63 38.78

296 W0D-OTH 48.22 21.70 24.10 2.49 10.61 30.05 7.72

297 OTH-CONSt 12.56

298 PETROLEUM 0.12 13.43 19.12 0.83 2.15 422.39 14.28 76.06

299 EL-GAS 15.25 114.78 3.18 5.04 507.55 166.02 367.12

300 TRP-SERV 282.04 385.40 3P2.18 72.49 44.27 10.85 397.06 178.97

301 PUB-ADM 0.49 0.47 1.06 0.49 0.06 10.01 33.71 23.82

302 TRADE-OTH 658.01 1292.26 1311.57 294.84 144.67 788.15 6472.59 1368.99

303 VALUE-ADD 7607.65 2239.13 2288.59 1721.28 5189.47 892.36 5142.57 4766.85

304 EXCISE 71.50 3091.60 227.20 53.70 43.60 255.00

305 DUTY 182.73 70.68 1.40 12.79 468.70 34.81

306 SALES 44.20 12.92 5.30 0.19 454.20 4.89

307 INTERM-IHP 163.57 438.65 649.09 1206.84 142.23 1389.53 484.64

308

309

310 + PAPER LEATHER FERTILIZCR PHARtf-Cfl CVtNT BASIC-MET METAL-PROD WOOD-OTH

311

312 RICE 1.99

313 WHEAT 0.23

314 JUTE 12.97

315 OTHCROPS 15.02

316 LTVESTOCK 1140.43 79.33

317 FORESTRY 502.87 915.40

318 SUGAR 12.26

319 EDIBLEOIL 393.39

320 OTbs OOD 185.28 76.22 29.53 12.68

321 COTTONYARN 93.25

322 CLOTH 0.37 0.85 0.29 2.20 25.49

323 JUTETXT 0.53 0.01 58.82 0.02 2.36 0.31 0.03 0.91

324 PAPER 371.69 238.17 39.94 0.74 35.54 615.31

325 LEATHER 0.57 1430.27 7.12 6.65

326 FERTILIZER 0.14 0.35 0.04

327 PHARM-CHEM 167.26 262.91 190.60 1097.36 0.00 5.08 117.30 1154.91

328 CIEENT 16.88 0.32 392.43 4.60

329 BASIC-MET 2.12 2.90 2480.1?. 1865.40 62.55

330 METAL-PROD 3.88 9.82 4.62 4.97 0.21 8.07 587.89 66.75

331 WOOD-OTH 18.51 19.19 30.05 105.12 1.88 51.84 256.77 1689.83

332 PETROLEUM 154.17 0.23 3.63 9.67 0.14 18.95 38.82 216.80

333 EL-as 111.23 6.35 349.10 38.30 6.49 84.42 137.50 180.41

334 TRP-SERV 134.80 486.87 394.10 00.26 19.60 157.62 618.12 746.59

335 PU8-ADM 2.46 1.80 0.56 4.66 0.04 2.19 10.95 14.14

336 TMIDE-OTH 609.62 1547.58 853.16 2420.17 62.82 554.70 4618.80 6101.71

337 VALUE-ADD 494.78 2818.31 2635.13 2744.49 237.18 2057.62 3183.17 2098.99

- 131 -

Data Tables33B EXCISE 156.90 2.90 133.90 75.40 332.80 545.30

339 DUTY 178.80 411.41 69.30 1880.50 439.35 729.41

340 SALES 99.03 192.69 143.10 1083.40 157.99 305.30

341 INTER-IHP 134.97 3321.71 3327.35 1326.40 5788.60 6913.71 3494.34

342

343

344 + URN-=LDG RUR-NBLDG 0TH-CONS PETROLZUM EL-US TRP-SEV SING BEALTH

345

346 RICE 47.44347 WHEAT 5.51

348 JUTE 3.15 5.36

349 TEA 0.71

350 OTQCROPS 3.45

351 LIVESTOCK 0.31

352 FISBERIES 5.78

353 FOPESTRY 458.11 4227.81 870.82354 SUGAR 1.34

355 EDIBLEOIL 9.89

356 OTHFOOD 4.65

357 CLOT! 96.71 24.01

358 JUTETEXT 0.42

359 PAPER 1.87 4.33

360 PELARH-CDM4 27.46 102.37 77.16 0.53 753.96

361 CENT 302.24 251.10 904.93

362 BASIC-ET 361.29 330.36 4128.40

363 METAL-PROD 18.17 149.52 574.50 10.60 127.53 123.44 2.49

364 WOOD-OT! 470.51 295.42 3146.58 0.92 143.06 35.07 1.98 18.03

365 URB-BBLDG 299.25

366 RUR-BBLDG 279.49

367 OTH-CONST 103.07 374.59 184.34 1.17

368 PETIOLEIM 225.94 40827.32 1547.56 1084.82 5.78

369 EL-S 60.32 1222.65 98.93 3.11

370 TRP-SERV 73.30 929.39 296.67 623.56 13.52

371 PUB-ADM 23.24 7.00 41.16 183.33 24.31

372 TRADE-OTH 3007.81 965.92 1265.86 310.77

373 VALUE-ADD @44.66 1280.16 6037.74 128.39 2508.51 17871.24 9862.93 2695.80

374 EXCISE 336.60 1336.00 11.40

375 DUTY 264.43

376 SALES 4.71

377 INTERM-IMP 5039.61

378

379

380 + EDUCATION P1B-AH TADE-OTH TOT-CONS

381

382 RI'TE 162.83 6.19 124448.13

363 WHEAT 18.92 0.72 17218.26

384 TEA 2.42 0.09 424.17

385 OT1CROPS 11.83 0.45 30545.31

386 LIETOCK 3.20 0.04 6267.84

387 FISBES 19.83 0.75 22350.40

Data Tables - 132 -

368 FORBZTRY 165.95 065.77389 SUGAR 4.60 0.17 7194.23

390 EDIBLEOIL 33.97 1.20 11642.09

391 TOBRACO 7264.31

392 OTWOOD 5.54 15.04 0.60 66S5.39

393 COTTONYARR 26.50394 CLOCH 116.71 505.25 50.36 20465.16

395 JUTZTEXT 2.4* 0.09 107.45 61.70

396 PAPER 43.54 181.99 229.52 676.86

397 LEATHER 4636.398 PHARA-CME 606.69 1270.93 6973.33

390 NZTAL-PROD 7.80 60.30 45.87 6125.90400 M000-OT8 70.47 144.39 245.68 9863.49

401 URs-mum 0.64

402 OTH-COtST 30.97 43.80 50.31

403 PETROLEUM 9.65 12.76 105.43 5564.34404 EL-GAS 17.96 47.04 317.15 260.92405 TRP-SERV 39.94 585.42 63.04 1840.13

406 HOUSING 9613.03407 BZALTH 67.31 2216.99408 EDUCATION 2001.26

409 PUB-ADU 45.17 210.85 351.48

410 TRADE-OTH 1520.79 1945.72 5962.04411 VALUE-ADD 6527.93 12531.66 75821.12

412 MXCISE 210.00

413

414

415 + mIVST

416

417 fETAL-PROD 12045.49

418 URB-EBLD 2275.65

419 RUR-HBLDG 6213.00

420 0TH-CM0ST 4475.03

421

422

423 + PUBLIC UPORTS DIPONSs CDFIRAL UTFINAL STOCK

424

425 RICE 5684.78 149.58

426 WMEAT -523.69 9347.49 14.90

427 JUTE 1817.84 -0.46

428 COTTON 1446.36 -0.35

429 TEA 1002.55 5.60

430 OTIH0PS 571.03 393.40 193.42 115.92 33.39

431 LIVESTOCK 8.58 1.10

432 F1S1ER!S 877.61 61.34

433 FORESSRY 23.44 -1.91

434 SUGAR 1684.09 1104.89 1031.37 249.58 33.19

435 EDIBLROIL 3803.86 475.42 6S.66 17.66

436 TOBACCO 6.62

437 OTFOOD 172.16 1531.45 151.51 2.31 12.95

- 133 -

Data Tables438 COTTOYGAR -0.02

439 CLOTH 57.20 2625.72 3125.80 266.39 40.21 -106.74

440 JUTETUT 10625.49 18.68

441 PAPER 907.52 126.49 177.50 98.17 -0.35

442 LEATHER 1703.26 6.62

443 FERTILIZER -0.01

444 PBM-CM4 865.06 2808.00 395.89 185.42 -0.60

445 CElT 466.22 -1.37

446 BASIC-MZT 4887.09 -13.60

447 lTAL-IO 30667.02 26030.02 2144.15 771.01 -193.88

446 wow-0TH 2992.17 3142.45 3179.41 1107.40 463.50 -22.64

449 URB-UBLDG 9.85

450 RUR-EI.DG 47.24

451 O-OIISI 10559.96 44.99

452 PETROLEUM 67.87 602.07 33.37 0.59 -2.68

453 EL-G 3749.14 -1.16

454 TIP-SERV 99.27 -0.45

455 HOUSING 1137.78 3.61

456 DEALT! 1315.93 5.76

457 EDUCATION 4914.06 2.79

456 PM8-AJD 15479.62 13.72

459 TRADE-OTH 30.44 -1.96

460

461 IO(R.C) - IO(R,C)/1000

462

463 IO(I,"STOCK") 0 O464 IO(I."TOTAL") - BUM(C. IO(ZIC)) - 2(IC, T")4IOCI,"CO L)*IO(" ."))

465

466 IO("TOTAL1",C) - UM(. IOCI,C))467 IO2TATL2".C) - ZOCTOTAL19 C) + OC-VALUX-AD".C) + I0 TZ-DM .C) +

468 IO("'D U,C) + I0(*SALUS.C)

469

470 IOC"TOTAL'.C) - I0("TOAL2'.C) + IO("CISE",C);

471 IOCI,"STOCK") - IO("TOTAL'.I) - I0(I,");OTAL)

472

473

474 TABLE CDSTDATA(.-) 1984-85 COLICTION OF COSTS tCE TAKA)

475

476 IIQORT CD ST

477

478 MnIL 125.67 15.66

479 SPICES 23.97 6.7 4.13

480 TALLOW 34.6 17.61 10.56

481 EDIBLEOIL 292.47 46.84 0.61

482 COOUlU0IL 59.67 7.77 9.37

483 SUGAR 178.45 121.41 29.38

484 BEVERAGES 0.6 0.77 0.25

485 UnmEATORA 1.08 0.05 0.42

486 TODACPRD 0.44 0.09 0.11

487 CET 132.64 6.93 14.31

- 134^

Data Tables406 CC" 16.92 1.04 1.06

469 COALTM 2.66 0.6 0.68

490 PITCB-SIT 1.22 0.95 0.42

491 PtR-P"OD 443.28 29.78 0.53

492 CEZCALS 160.1 49.31 24.53

493 PRIIAAC 52.24 6.35 0.12

494 PAINTS-ETC 45.06 25.07 13.16

495 PHTO-CT"l 15.26 5.1s 2.94

496 PLAST-K6T 65.76 36.99 19.53

497 RUIUU 60.05 35.24 16.5

498 PULP-PAPER 10.07 1.09 0.46

499 BSOMS-KTC 62.67 34.54 19.26

soo s1ITH-FIUR 159.66 33.1 27.9

501 SYTS-PARR 7.06 8.0 2.86

502 RAWT?COUT 271.67 24 0.07

503 COTTSOYAW 7a2.98 14.77 17.52

504 COTTCOUAR 2.66 3.59 1.3

505 SECHANDCLO 35.0 19.63 0.35

506 CERMMIC 22.91 10.46 3.34

507 lIDS-STEEL 424.21 165.21 92.71

508 METALS 131.65 20.25 13.45

509 CUTLERY 22.54 13.67 5.29

510 MACHTMINY 693.7 161.86 50.7

511 RAILWn Y 16.39 2.69 2.9

512 MOTCRCWR 141.95 62.26 28.8

513 AIRCLAFT 1.55 0.24 0.1

514 SHIPS 111.51 17.43 5.11

515 OTER 296.9 05.64 34.57

516 DEV-SURCH 71.69

517

518 CDSTDATA(M .DMPM1) - CDSMaTA(U,DMRrT')/1100

519 CDSTDATA(W6.ICD") - CDSTDATA(N"CD')1100

520 CDSTDATA(GM .ST") - CDSTDATA(GN,ST")/100521

522 CDSTDATA "TOTAL" * "PQRT") - SM6ON CDSTDATAWNI ."DUO?"))

523 CDSTDATACTOTAL" *CD") - SUM(I, CDSTDATA(GH."CD"))

524 CDSTDATA('TOTAL, "IT") - SWMI(UH CDSTDATACM ?ST"))

525

526 PARAMZSZ ZXCIDATAC(X) CMLWTION Or EXCISZ DUTIZS 1984-85 (CHORE ThAA) I

527

528 TOBACCO 309.16, PZTHOLEUM 33.66, GAM 133.6. TEA 3.54

529 EZVZRAGZS 1.69 GLUCOSZ 0.63, SUGAR 6.32. BISCUIT 4.41

530 CM1J0 7.54, PAIMS 3.99, COMlTICS 3.33. SOMS-ETC 10.15

531 MATCEZS 3.69. PLASTIC 1.22. RUBBER 0.22. PAPER 8.52

532 PAPZUOARD 4.89, IAMKCQUE 0.71. COTTOHYARN 5.37, COTTOUFAIR 2.35

533 SINTWIIH 1.4, JUTZOMANUF 25.5. MOLYARI 0.27, WOM3AMR 0.34

534 GLASS 2.65, MTALC0T 1.15. NILOSTEEL 12.47, ZATTERIS 5.08

535 IULSSTUEUS 1.97. PASS 2.36, CERAMICS 3.51, WIRES 8.72

536 HOTELS 6.12 GOLD-SLVR 0.45. CINDIA 12.886 PACDA?UZ 1.57

537 ulCER 1.04, RADIo 5.61 al. CLES 4.79, HOES 2.33

- 135 -Data Tables

538 IOODFURN 0.78. IUDICIU 13.39. PESTICIDE 0.29. ZLCTRfDE 2.29539 STE2L-CUTL 0.01 PIPZ8 3.26. OtOwn 2.68, SOIUMSILI 0.53

540 GLYCCRINE 0.66, TRLEPHOUE 1.14. PLUSTICBAG 0.3, INSULDOARD 0.2541 NUTS-BOLTS 0.14. ELEOODS 0.06. CIUZALJM 0.57. SAUNITARY 0.66

542 LIQUOR-ETC 16.62. MISCZLL 0.32 /

543

544 EXCISEDATACGX) - MCCISEDATAMGM)/100

545 EMCISMDATA("TOTAL") - SUMGX. ZXCISUDATA(GX))546

547 TABLE SOOO0S(I SC) BUME YZAR CONSUMPTION BY SOCIOECONMIC CLASS (HILL TAXA)

548

549 LANDLESS iHALL MEDIUM-T MD1IU-0

550

551 RICE 21653.52 13561.54 15309.71 18054.64

552 WHEAT 3147.73 1803.47 1492.40 1555.67

553 TEA 53.36 36.14 43.71 55.65

554 OTNCROPS 4244.60 2760.79 326..31 4118.89

555 LrVESTOcK 486.07 390.28 543.36 783.02

556 FISHEXIS 2917.08 1984.38 2396.81 3019.54

557 FRSTRY 26.40 17.36 33.41 21.79

558 SUGAR 802.15 566.50 710.08 935.04

559 EDIBLEOIL 1757.21 1123.46 1288.11 1552.14

560 TOBACCO 1013.59 664.00 795.43 985.78

561 OTHFOOD 617.88 512.26 730.62 1074.08

562 CLOTS 3549.10 2869.74 2576.55 2959.93563 PAPER 74.95 82.57564 LEAHER 1155.40 584.29 494.67 615.10

565 PIUAN-CBEM 695.30 439.98 843.97 1135.63

566 METAL-PROD 159.61 209.12 408.07 591.70567 WOOD-OTU 613.63 318.57 540.18 828.00

568 PETROLU 554.81 351.06 673.44 906.17

569 TRP-SERV 129.12 126.20 339.78 452.89

570 HOUSING 1453.64 800.22 1052.01 1215.90

571 HEALTH 145.66

572 EDUCATION 215.06 76.73 221.45 365.92

573 TRDE-OTI 215.53 111.89 200.23 305.95574

575 + LARE LAET RIIR-III RR-FO URN-IMf Ut-FOR576

577 RICE 15416.91 6676.97 11693.57 10354.51 6729.20 4995.25578 WIEAT 1328.36 651.07 1699.87 1635.45 2040.96 1862.27

579 TEA 54.37 33.94 30.48 50.86 23.97 41.66

580 OTECROPS 3780.62 2187.99 2382.28 3342.88 1810.34 2633.61581 LIVESTOCK 890.27 608.60 305.04 090.14 260.12 699.83582 FISHERIES 2876.03 1654.30 1673.79 2540.12 1313.44 1974.03

583 FORESTRY 24.78 13.66 199.06 359.27 196.19 93.85584 SUGAR 053.74 638.22 468.38 940.33 383.61 706.19585 EDIBLEOIL 1403.33 754.39 974.10 1176.02 722.51 890.81

568 TOBACOCO 890.21 490.66 581.07 853.32 436.09 554.17

587 OTIFOOD 1248.04 1008.88 394.47 1410.77 373.01 1306.38

- 136 -Data Tables

568 CLOTS 1607.00 778.50 1624.90 1352.98 1204.32 1943.13

589 JUTET= 2.75 5.24 11.99 21.62 9.42 10.67

590 PAPER 124.28 66.89 151.93 79.87 76.38

591 LEATMS 392.73 243.29 329.08 592.49 204.46 227.21

592 PSARI-CEMD 1114.64 651.42 433.16 782.13 305.90 571.23

593 IETAL-PRD 916.47 1098.38 473.01 854.07 348.37 1167.19

594 WO0OTI 1423.99 1044.55 937.08 1692.22 657.30 1607.96

595 PETROEM U9.42 519.80 345.64 624.09 244.00 455.61

58 ZL-GAB 260.92

597 TRP-SERV 202.11 144.66 100.64 133.33 69.68 119.52

598 lOUSING 1011.26 605.09 641.11 1091.35 742.72 998.74

599 SEALTE 409.86 417.48 517.18 169.93 556.88

600 EDUCATION 293.75 256.71 54.32 269.31 47.20 200.83

601 TRADE-OTE 1083.87 832.62 79.22 1246.37 468.03 1418.33

602603 SCCONS(I.SC) - SMM(ISC)/1000:

604

605 TABLE VASEARICSC.J) SBAEAS OF VALUE ADDED BY SOCIO-ICOaIC CLASS (U)ITLESS)

606

607 RICE WhAT JUTE COTTON TEA OTBCM0PS LIVESTOCK

608

609 LANDLESS 0.2634 0.2225 0.6295 0.0057 0.0660 0.1538 0.2053

610 MALL 0.1309 0.1311 0.2011 0.0840 0.0780 0.1070 0.1304

611 MEDIUM-? 0.1054 0.1109 0.0349 0.2228 0.1918 0.1404 0.1264

612 MEDIUM-0 0.1744 0.1911 0.0574 0.2410 0.1986 0.1867 0.2202

613 LARGE 0.1667 0.1806 0.0419 0.2883 0.2683 0.1938 0.1416

614 LARGEST 0.1183 0.1121 0.0226 0.1582 0.1973 0.1144 0.0674

615 RUR-INW 0.0117 0.0147 0.0036 0.0228 0.1086

616 RU-FOR 0.0192 0.0243 0.0061 0.0793

617 URB-IXF 0.0037 0.0047 0.0010 0.0006

618 UR-FOR 0.0064 0.0081 0.0020 0.0013

619

620 + FISEERIS FONESTEY SUGAR EDIBLO TOBAO OTIO COTTONyARN

621

622 LANDLESS 0.0859 0.1301 0.2089 0.0479 0.1192 0.0864

623 SMALL 0.0328 0.0772 0.0950 0.0756 0.1188 0.1249

624 MEDIUM-T 0.0963 0.0827 0.1030 0.1902 0.1945 0.1640

625 MEDIUM-O 0.0988 0.0889 0.1718 0.2122 0.2010 0.2857

626 LAGE 0.1361 0.0665 0.2201 0.2820 0.2275 0.2165

627 LARGEST 0.0982 0.0273 0.1545 0.1823 0.1390 0.1224

628 RUR-IN? 0.2078 0.0717 0.0133 0.0053

629 RUR-FOR 0.2440 0.4557 0.0221 0.0029

630 UEB-IUF 0.0041 0.0005 0.4867

631 UMB-FOR 0.0073 0.0010 0.5133

632

633 + CLOTH JUTETT PAPR LEIAR FETILIZER PIAi-CSM CEMENT

634

635 LANDLSS° 0.0394

636 SMALL 0.0382

637 ED711,-T 0.0421

Data Tables - 137 -

636 MCDIUM-O 0.07S2

639 LARGE 0.0523

640 LARGEST 0.0256

641 RUR-INF 0.6778 0.0723 0.0676 0.3616

642 RUR-FOR 0.0463 0.0007 0.0167 0.2126

643 URN-It? 0.2608 0.6010 0.5730 0.0356 0.1511 0.2329 0.2259

644 URN-FOR 0.0470 0.3090 0.3531 0.6091 0.6469 0.1939 0.7741

645

646 + BNAIC-MT MSIAL-PROD WOOD-OT! UR8-RLDG RUR-ISLOG OB-COPST PCTROLEUH

647

648 LANDLESS 0.1608 0.1157

649 U4ALL 0.1047 0.0846

650 MEDI1U-T 0.1274 0.1145

651 UDIUHM-0 0.1573 0.1412

652 LARGE 0.1520 0.1365

653 LARGEST 0.1046 0.0U42

654 RUR-IN? 0.0064 0.0603 0.4046 0.1048 0.1216

6S5 RUR-FOR 0.0058 0.0347 0.2354 0.0662 0.0762

656 URB-INW 0.0944 0.1609 0.2501 0.4685 0.0954 0.4541

657 U&N-FOR 0.8934 0.7241 0.1097 0.5115 0.0200 0.5459

658

659 + EL-Gs tRP-SZV HOUSING EALT? ZDUCATION PUB-ADM TRADZEOTB

660

661 LANDLESS 0.1100 0.1473 0.0701

662 ISALL 0.1325 0.0960 0.0995

663 FEDIUM-T 0.1079 0.1156 0.1589

664 DItUM-0 0.1704 0.1441 0.1558

665 LARGE 0.1292 0.1393 0.1495

666 LARGEST 0.0418 0.0961 0.0717

667 RUR-INF 0.1262 0.0769 0.0735 0.0730 0.0611 0.0891

668 RUR-FOR 0.0724 0.0075 0.3121 0.3276 0.3864 0.0974

669 URB-INF 0.4541 0.0112 0.0439 0.3371 0.3347 0.2679 0.0214

670 URN-FOR 0.5459 0.0085 0.0420 0.2773 0.2645 0.2626 0.0804

671

672 VASSARE(SC.I) - VASBUARE(SC.I)ISUMCSCA, VASEARE(SCA.1))

673

674 PARAHER OTHIZNCHECSC) INCOME OTUU TU N FACTOR PAYMNTS (HILL TAXA) I675

676 LANDLESS 3040.29, DALL 1303.55, MEDIUM-T 1696.81. FDIUM-O 2091.79

677 LARGE 2022.76, LARGEST 1194.31, RUR-INP 3359.02. RUR-FOR 10305.07

678 URB-INw 1936.81, URN-FOR 7510.96 ;

679

680 OTHINUCM(SC) - OTUINCMB(SC)1000;

661

662 TABLE 5ESO1(I.tI.K) BANGLADESH HOUSEBOLD UUDrITURI SURVEY DATA 19.11-82 WUNITLESS)

663

684 URBAN.0-300 URBAN.300-399 URNAW.400-499 URBAN.500-749 URJAN.750-999

685

686 RICE 0.270266 0.303709 0.258630 0.225933 0.234324

6867 IMT 0.083780 0.083371 0.066885 0.063151 0.055570

- 138 -Data Tables688 TEA 0.014517 0.014568 0.014709 0.007282 0.006563

689 LIVESTOCK 0.0580S6 0.032422 0.038816 0.048732 0.047532

690 FISHERIES 0.040152 0.037600 0.037086 0.037869 0.043338

691 SUGAR 0.023844 0.022663 0.015612 0.017376 0.016675

692 EDIBLEOIL 0.020925 0.030430 0.010605 0.019560 0.020013

693 TOBACCO 0.020838 0.024865 0.022118 0.023480 0.022964

694 OT5OOD 0.108369 0.135513 0.109009 0.111167 0.121526

695 CLOTH 0.070204 0.047705 0.051285 0.040925 0.045596

696 JUTETEXT 0.001116 0.003065 0.002594 0.002130 0.001747

697 LEATHER 0.017915 0.049482 0.012064 0.010478

698 FERTILIZER 0.003473 0.018153 0.011467

699 PHARM-CHEM 0.020196 0.026618 0.019046 0.019950 0.021935

700 MTEAL-PROD 0.002719 0.007009 0.005364 0.033128 0.029858

701 WOOD-OTH 0.102540 0.077869 0.066101 0.047211 0.046225

702 PETROLEUM 0.023788 0.022139 0.022945 0.023315 0.022797

703 EL-GAS 0.065390 0.065482 0.053246

704 TRP-SERV 0.022653 0.026240 0.029839

705 HOUSING 0.068966 0.062075 0.047331 0.057380 0.070080

706 HEALTH 0.003300 0.004424 0.002890 0.002912 0.003347

707 EDUCATION 0.016312 0.006719 0.004135 0.005661 0.010839

708 TRADE-OTH 0.050104 0.039210 0.054762 0.092896 0.074041

709 * PER CAP CO 1789.35 1780.63 2383.82 2845.30 2671.09

710

711

712 + URBAN.1000-1249 URBAN.1250-1499 URRAN.1500-1999 URLAI.2000-2499 URBAN.2500-2999

713

714 RICE 0.224815 0.226874 0.209350 0.167165 0.178342

715 WHEAT 0.051092 0.04:925 0.042609 0.033961 0.030613

716 TEA 0.007334 0.007224 0.006297 0.005953 0.006080

717 LIVESTOCK 0.046563 0.052093 0.055492 0.047546 0.057233

718 FISHERIES 0.043908 0.046785 0.045914 0.042097 0.045412

719 SUGAR 0.017751 0.019330 0.019678 0.017716 0.018137

720 EDIBLEOIL 0.021401 0.022033 0.021403 0.020886 0.021280

721 TOBACCO 0.023739 0.023450 0.022065 0.020340 0.022807

722 OTFOOD 0.122901 0.130661 0.123722 0.117995 0.119083

723 CLOTH 0.043479 0.048880 0.050501 0.05C707 0.056906

724 JUTETEXT 0.001297 0.001656 0.001349 0.001121 0.001081

725 LEATME 0.018769 0.020713 0.018905 0.013923 0.013828

726 FERTILIZER 0.009447 0.005127 0.009875 0.009209 0.012365

727 PEARM-CHEM 0.021581 0.022613 0.024350 0.024547 0.025239

728 METAL-PROD 0.022143 0.027591 0.040237 0.041481 0.036026

729 WOOD-OTH 0.046485 0.041618 0.039052 0.030091 0.030627

730 PETROLEUM 0.021642 0.022922 0.018380 0.013024 0.014894

731 EL-GAS 0.045609 0.041705 0.039768 0.031212 0.028713

732 TRP-SERV 0.023646 0.022800 0.022196 0.022227 0.027526

733 HOUSING 0.074195 0.087984 0.093167 0.112345 0.143638

734 8ZALTH 0.003177 0.003143 0.003445 0.002550 0.002806

735 EDUCATION 0.013323 0.013694 0.019754 0.021463 0.028333

736 TRADE-OTB 0.095702 0.065180 0.071502 0.152442 0.079032

737 * PER CAP CO 3197.04 3399.47 3773.58 4892.88 5030.43

Data Tables - 139 -738

739 + URBAH.3000--3999 UREUR.4000-4999 URBA*.5000-5999 URBAN.6000- URBAR.AVERAGE

740

741 RICE 0.146846 0.182130 0.105066 0.090755 0.159124

742 WHEAT 0.025322 0.020916 0.018126 f.015802 0.032327

743 TEA 0.005642 0.004973 0.00*884 0.004840 0.006321

744 LIVESTOCK 0.056303 0.057125 0.061296 0.057310 0.056996

745 FISHERIES 0.045077 0.039063 0.038977 0.037171 0.039443

746 SUGAR 0.016368 0.015634 0.016097 0.014337 0.016764

747 EDIBLEOIL 0.021001 0.019965 0.019061 0.018135 0.018943

748 TOBACCO 0 022901 0.035438 0.028068 0.032742 0.023159

749 OTUFOOD 0.120401 0.113336 0.132273 0.125260 0.112173

750 CLOTH 0.051924 0.048679 0.054435 0.052480 0.046296

751 JUTETEXT 0.001365 0.000906 0.000957 0.005260 0.001498

752 LEATHER 0.012799 0.013957 0.009680 0.009272 0.015349

753 FERTILIZER 0.010733 0.013707 0.006711 0.004234 0.008998

754 P8ARM-CHEM 0.026634 0.025041 0.025776 0.028005 0.022895

755 METAL-PROD 0.055551 0.067233 0.070563 0.125776 0.088936

756 WOOD-OTH 0.029275 0.046185 0.024375 0.024736 0.032331

757 PETROLEUM 0.011627 0.008124 0.005171 0.008227 0.013799

758 EL-GAS 0.031021 0.028516 0.024739 0.021410 0.034265

759 TRP-SERV 0.031685 0.026743 0.026014 0.051875 0.034187

760 HOUSING 0.147995 0.149747 0.165997 0.122605 0.114820

761 HEALTH 0.003041 0.003975 0.002982 0.004007 0.003213

762 EDUCATION 0.031402 0.035143 0.027671 0.038226 0.027297

763 TRADE-OTH 0.095087 0.103466 0.131062 0.107537 0.090868

764 * PER CAP CO 5621.58 7341.42 7977.49 10741.78 4975.97

765

766

767 + RURAL.0-300 RURAL.300-399 RURAL.400-499 RURAL.500-749 RURAL.750-999

768

769 RICE 0.279221 0.203348 0.294610 0.310356 0.292311

770 WHEAT 0.095257 0.100550 0.092231 0.083107 0.071377

771 TEA 0.015195 0.009817 0.010098 0.009451 0.006392

772 LIVESTOCK 0.036441 0.029491 0.036252 0.037726 0.044919

773 FISHERIES 0.036244 0.035922 0.036799 0.040102 0.040155

774 SUGAR 0.018956 0.017242 0.016492 0.016246 0.016660

775 EDIBLEOIL 0.019053 0.018631 0.017186 0.018691 0.018672

776 TOBACCO 0.016193 0.015851 0.014917 0.016542 0.015859

777 OTHFOOD 0.095007 0.101401 0.097552 0.108357 0.109411

778 CLOTH 0.066558 0.061208 0.053534 0.058152 0.056004

779 JUTETEXT 0.003045 0.002087 0.001835 0.002051 0.002949

780 LEATBER 0.011699 0.011224 0.006295 0.007576 0.009973

781 FERTILIZER 0.011009 0.018147 0.013668 0.013425 0.013285

782 PHARM-CHEM 0.019578 0.017601 0.016431 0.018231 0.018455

783 METAL-PROD 0.008231 0.006315 0.017315 0.021268 0.036256

784 WOOD-OTH 0.060317 0.054738 0.047192 0.042707 0.037441

785 PETROLEUM 0.014623 0.013200 0.012980 0.013655 0.012676

786 EL-GAS 0.019392 0.015398 0.035642 0.010163 0.019778

787 TRP-SERV 0.007708 0.020417 0.010368 0.012513 0.013796

Data tables - 140-

70e ECISfPG 0.046135 0.041920 0.042642 0.045597 0.047762

?09 EEALM 0.003867 0.003632 0.003301 0.003319 0.002584

79o ED1CATON 0.006399 0.004776 0.009058 0.006090 0.007840

701 rRADR-O0T 0.10961 0.107084 0.113521 0.10460 0.105245)93 * PER CAP CONS 1709.61540 1704.45744 1866.67189 1933.26158 2223.65067

793j 2 *4 RURAL.1000-1249 RURAL.1250-1409 RURAL.1500-1999 RURAL.2000-2409 URAL.2500-2999

795 RICE 0.290213 0.293557 0.268239 0.248454 0.238524

797 WHEAT 0.065911 0.058963 0.053186 0.046995 0.048252

798 TEA 0.005773 0.005631 0.004470 0.004381 0.004526

799 LIVESTOcK 0.043361 0.045625 0.045045 0.046973 0.046410

oo F1SERIES 0.041766 0.042143 0.043305 0.043296 0.042107

801 S1UGJ 0.016058 0.015725 0.015438 0.015956 0.013814

802 EDZBLPOZL 0.019399 0.020331 0.020880 0.020918 0.020351

803 TVIaOCO 0.015945 0.015569 0.014997 0.014473 0.014466

804 0TOfOOD 0.114252 0.115079 0.112367 0.115780 0.113724

805 CLOSH 0.061614 0.059294 0.061772 0.064011 0.069350

806 JUtETSXT 0.001730 0.001792 0.001414 0.001534 0.001410

807 LEAThER 0.008563 0.010067 0.011072 0.010537 0.011066

808 FERTILIZER 0.015248 0.015488 0.016841 0.015756 0.018221

809 PUARM-CUHM 0.019551 0.019978 0.021271 0.021399 0.020639

810 HTaAL-PROD 0.019506 0.038045 0.023778 0.025124 0.018844

all w0CO!Rm 0.030993 0.034900 0.031393 0.030376 0.029206

813 PETROLEUM 0.012543 0.012451 0.012006 0.011596 0.009314813 EL-GMS 0.033522 0.013635 0.045768 0.024590 0.046441

814 TRP-SVRV 0.012308 0.014668 0.011807 0.017017 0.018750

813 ROUSING 0.049775 0.053721 0.057738 0.055419 0.064824

6t6 HEALTH 0.003415 0.003094 0.002536 0.002667 0.002865

61i EDUCATION 0.008780 0.010289 0.011864 0.014321 0.014842

318 TRADEz-CT 0.101749 0.099555 0.112015 0.147628 0.132053

i9 * PER CAP Co 2412.02506 2554.86816 2982.41602 3421.15677 3773.21262

820

8Z3 * RURAL.3000-3909 RURAL.4000-4M9 RURAL.5000-5999 RURAL.6000- RURAL.AVZRAGE632

833 RICE 0.251668 0.227338 0.201641 0.180134 0.288866

834 IH£KT 0.041068 0.039058 0.051177 0.012614 0.058399

825 TEA 0.004314 0.003020 0.002892 0.003176 0.005546

836 LIVESTOCK 0.048940 0.049809 0.053340 0.036869 0.046678

837 FISHERIES 0.041840 0.041256 0.052330 0.028402 0.038431

838 SUGaR 0.014129 0.013932 0.015852 0.009707 0.015367

8Z9 EDISLEOIL 0.021158 0.018017 0.020799 0.012036 0.018020

830 TOBMCCO 0.013758 0.011767 0.009450 0.010266 0.014103

831 OTSOOD 0.1068S5 0.108335 0.108972 0.081968 0.101639

632 CLOTH 0.069113 0.075248 0.077397 0.061540 0.057090

633 JUTE=TU 0.001596 0.001397 0.000936 0.000720 0.001766

034 LZATHER 0.009961 0.004492 0.012390 0.009190 0.011578

035 tISSLIZER 0.020877 0.013131 0.012008 0.014622 0.015935

038 PRAHD-CR6M 0.025573 0.018613 0.023340 0.018972 0.016628

837 METSL -OD 0.021222 0.012013 0.017517 0.020276 0.031811

- 141 -

Data Tables838 10D-O T 0.026901 0.023367 0.029842 0.028716 0.034115839 PlTREt3L 0.010582 0.010153 0.007716 0.007501 0.011194840 EL-S 0.007544 0.010577 0.026641 0.007100 0.09662841 TRP-SUV 0.015542 0.013927 0.031038 0.025026 0.016607842 HOUSING 0.087732 0.054412 0.075794 0.136651 0.052344843 RRj.TH 0.003968 0.002869 0.005545 0.002160 0.002946844 EDUCATION 0.019069 0.015954 0.010314 0.060459 0.015202845 T llEOT8 0.156558 0.221497 0.153266 0.211891 0.114069846 * P CAp Co 3973.48842 5240.10S30 5277.40133 7317.91322 2769.678377847

848

849 + BANGLADES.0-300 BA.GADES0.300-399 BANGLADESH. 400-499 BANOLADESH.500-749 &ANGLADS.750-999

850

851 RTCE 0.278291 0.205864 0.299141 0.304376 0.302748852 WEAT 0.094720 0.099317 0.068803 0.076051 0.064878853 TEA 0.015140 0.010294 0.010399 0.008752 0.006166854 LIVESTOCK 0.036429 0.029305 0.035746 0.035805 0.041913855 nissEus 0.036212 0.035675 0.036019 0.037324 0.037597856 SUGAR 0.018994 0.017239 0.016045 0.015346 0.015520857 EDIBlZOIL 0.010038 0.018721 0.016922 0.017565 0.017685858 TOUIAC0 0.016227 0.015878 0.014884 0.016070 0.015408859 OTiOOD 0.095001 0.101263 0.095943 0.101631 0.103087860 CLOTH 0.066429 0.060453 0.052203 0.052784 0.051033861 JUTET 0.002979 0.002075 0.001849 0.001940 0.002628862 LEATHER 0.011657 0.011261 0.009298 0.008437 0.009553863 PUTILIZER 0.010969 0.017984 0.013110 0.012233 0.012040864 PAM-cUM 0.019540 0.017611 0.016191 0.017242 0.017553865 METAL-PROD 0.008170 0.006269 0.016866 0.020313 0.033192868 WOOD-OT8 0.002114 0.055898 0.048656 0.041271 0.036023867 PETROLEUM 0.014767 0.013276 0.013180 0.013627 0.012720868 EL-S 40.019322 0.015258 0.041944 0.057994 0.051955869 IRP-SUV 0.007681 0.020235 0.010847 0.012797 0.015933870 OUSIx 0.046444 0.041968 0.041924 0.043766 0.046778871 HEALTH 0.003850 0.003625 0.003282 0.003075 0.002498872 EDUCATION 0.008806 0.004814 0.008672 0.005715 0.007608

873 TRADE-OTH 0.109220 0.105717 0.106278 0.095886 0.005383874 * pR CAP CO 1715.75 1719.81 1931.55 2135.32 2458.28875

876 + BANGLAES. 1000-1249 BAGADESH.1250-1499 BANGLDESH.1500-1999 BANGLADESH.2000-2499 BANGLADESH.2500-2999877

878 RICE 0.305164 0.300898 0.281285 0.236872 0.240454579 WHrAT 0.060213 0.052464 0.049119 0.042249 0.040813880 TEA 0.006397 0.006335 0.005325 0.005633 0.005539981 LIVESTOCK 0.041159 0.043137 0.045116 0.046376 0.048783882 FISHDXES 0.039653 0.039651 0.041950 0.042093 0.041954883 SUGAR 0.015475 0.015204 0.015692 0.016333 0.014835884 EDIBLOIL 0.018559 0.019041 0.020104 0.020529 0.020086885 TOUACCO 0.015950 0.015467 0.015645 0.015670 0.016137886 OTFOOD 0.108863 0.108717 0.109724 0.114255 0.11287887 CLOTE 0.055604 0.053037 0.057148 0.059198 0.063732

142 -

Data Tables888 JUUEIT 0.001578 0.001652 0.001342 0.001373 0.001272889 LEATHER 0.009765 0.012318 0.013590 0.012700 0.012330890 FERTILIZER 0.013819 0.013536 0.015409 0.013939 0.016315691 PF8,0-CICM 0.016709 0.016651 0.020937 0.021076 0.021494892 NETAL-PROD 0.018344 0.033735 0.024101 0.027294 0.020836F93 WOOD-OTB 0.038019 0.033521 0.031481 0.029300 0.026524894 PZITOLEIRM 0.012810 0.012818 0.012277 0.011251 0.009962Rga It-GAS 0.050787 0.047464 0.045227 0.039803 0.034955

_ cV 0.014471 0.016417 0.014889 0.020153 0.025287TSING 0.050259 0.055099 0.061736 0.0716O8 0.086730

ALTU 0.003186 0.00284 0.002571 0.002562 0.002786

UCATION 0.008067 0.010149 0.013056 0.016474 0.018713

t wuu xa.-uxi 0.092242 0.087604 0.102272 0.132009 0.115357

901 * PER CAP CO 2653.17 2893.77 3240.67 3850.69 4200.55902

903 + BANGlADESH.3000-3999 BANGLADESB.4000-4999 BANGLADESS.5000-5999 RANGLADES8.6000- BANGLADESH.AVERAOE904

905 RICE 0.213227 0.172334 0.139563 0.101555 0.249620906 HIEAT 0.032259 0.027557 0.028184 0.014199 0.050481

907 TEA 0.005547 0.004708 0.004335 0.004013 0.007015

908 LIVESTOCK 0.050438 0.051963 0.OS5035 0.043190 0.049058

909 FISHIERES 0.041572 0.039195 0.042430 0.028910 0.037261

910 SUGAR 0.014736 0.014691 0.015081 0.010752 0.015545

911 EDIBLEOIIL 0.020286 0.018491 0.018769 0.013834 0.017536

912 TOBACCO 0.016181 0.020519 0.017689 0.021373 0.015230

913 OTHFOOD 0.108202 0.108033 0.115573 0.093581 0.100018

914 CLOTH 0.059336 0.060941 0.061063 0.046676 0.052550

915 JUTETEXT 0.001431 0.001149 0.000865 0.002444 0.001640

916 LEATHER 0.012232 0.009862 0.010607 0.008008 0.015045

917 FERTILIZER 0.017168 0.011364 0.009100 0.008784 0.013794

918 PEUARM-CUD 0.024982 0.021114 0.023344 0.021006 0.018933

919 METAL-PROD 0.03289 0.038403 0.093961 0.061894 0.042727

920 WOOD-OTH 0.025565 0.028388 0.024311 0.021034 0.032662

921 PETROLEUM 0.009948 0.008776 0.005939 0.006308 0.010905

922 EL-GAS 0.036867 0.032399 0.029233 0.020667 0.051043

923 TRP-SERV 0.024723 0.022326 0.027889 0.040978 0.027163

924K HOUSING 0.097868 0.102661 0.119744 0.195799 0.063912

925 EEALTH 0.003439 0.003294 0.003884 0.002790 0.002939

926 EDUCATION 0.024006 0.024366 0.019856 0.044155 0.019071927 TRADE-OTH 0.126597 0.177466 0.133548 0.188050 0.105852

928 * PER CAP CO 4782.12 6230.65 6882.31 11022.91 3200.54

929

930

931 TABLE BES83(I.U,K) BAGALADESH HOUSEHOLD MEPERDITURE SURVEY DATA 1983-84 (UNITLESS)

932

933 URBAR.0-300 URBAR. 300-399 IURBAN.400-490 URBAN.500-749 URBAN.750-999934

935 RICE 0.335729 0.161870 0.224435 0.260378 0.233841

936 WHEAT 0.070269 0.064780 0.069725 0.074069 0.054100

937 TEA 0.007808 0.023033 0.009729 0.012391 0.008262

Data Tables - 143 -

938 LIVESTOCK 0.007808 0.034540 0.026408 0.025560 0.031339

939 FrSMz8 ZS 0.023423 0.010434 0.045093 0.045705 0.041095

940 SUGAR 0.031231 0.046066 0.011891 0.010161 0.007259

941 EDIBLEOIL 0.070269 0.030071 0.026534 0.028080 0.026700

942 TOBACCO 0.003455 0.026060 0.020292 0.018962

943 OTHFOOD 0.202999 0.122601 0.151637 0.136123 0.118359

944 CLOTP 0.110764 0,045245 0.041878 0.049216

945 JUTETmfT 0.004777 0.002016 0.001015 0.001358

946 LEATE 0.015833 0.008168

947 FERTILIZER 0.006876 0.012901

946 IHARU-CHlM 0.032613 0.009004 0.006760 0.013139

949 METAL-PROD 0.011975 0.005058 0.028436 0.021603

950 W0D-OTM 0.029751 0.062591 0.057019 0.048822

951 PETROLEUM 0.078076 0.031350 0.015036 0.018801 0.016878

952 EL-GAS 0.092427 0.042735 0.103017

953 TRP-SERV 0.035268 0.014286 0.021283

954 HOUSING 0.039038 0.170079 0.060622 0.063881 0.060029

955 HEALTH 0.016237 0.004777 0.008545 0.007571 0.002928

956 EDUCATION 0 005271 0.003576

957 TRADE-OTH 0.117115 0.102055 0.041771 0.074670 0.097082

958 * PER CAP CO 3074 2084 2467 2905 3508

959

960 + UR.BAN.1000-1249 URBAN.1250-1499 URBAN.1500-1999 UiBAN.2000-2499 URBAN.'2500-2999

961

962 RICE 0.237757 0.218470 0.227452 0.210607 0.193059

963 WOEAT 0.042584 0.043088 0.041911 0.039366 0.036259

964 TEA 0.011006 0.008002 0.010156 0.008323 0.007347

965 LIVESTOCK 0.037520 0.038703 0.041048 0.045999 0.053484

966 FISHERIES 0.048556 0.050254 0.050309 0.053623 0.051655

967 SUGAR 0.009415 0.008130 0.008430 0.008835 0.008527

968 EDIBELIL 0.028060 0.026814 0.025724 0.026504 0.024266969 TOBACCO 0.023507 0.021877 0.020292 0.021286 0.021116

970 OTEFOOD 0.122845 0.125798 0.127257 0.120385 0.117454

971 CLOTH 0.043628 0.051857 0.050428 0.056644 0.060833

972 JUTETUET 0.001596 0.001391 0.001292 0.001233 0.001348

973 LEATHER 0.015620 0.014880 0.012400 0.015902 0.017828

974 FERTILIZER 0.008684 0.019146 0.011042 0.012291 0.013660

975 PHAUM-CHD3 0.010774 0.009333 0.009955 0.009185 0.009354

976 METAL-PROD 0.037228 0.045718 0.026997 0.032643 0.016804

977 WOOD-017B 0.047601 0.046589 0.043263 0.044942 0.037108

978 PET EUWJ.M 0.016061 0.015296 0.013841 0.013697 0.011120

979 EL-GAZ 0.069922 0.051919 0.050763 0.040008 0.033221

980 TRP-SERV 0.014418 0.015570 0.021051 0.019176 0.023778961 HOUSING 0.063972 0.080001 0.079104 0.088705 0.004816982 EALTH 0.005105 0.004943 0.003757 0.002561 0.003528

983 EDUCATION 0.007130 0.011790 0.012696 0.013294 0.016073984 TRADE-OTH 0.097013 0.090400 0.110832 0.114792 0.147360

985 * PER CAP CO 3799 4314 4581 4887 5744986

987 + URUAN.3000-3999 URHAN.4000-4999 URBAR.5000-5999 URBAH.6000- URBAN.AVERAGE

- 144 -

Data Tables

988

989 RICE 0.186178 0.141392 0.140400 0.101897 0.172566

990 W%AT 0.034415 0.022216 0.021008 0.016466 0.031629

991 TEA 0.007435 0.005699 0.007856 0.006140 0.0080S1

992 LIVESTOCK 0.050216 0.080190 0.057481 0.066580 0.051455

993 frgIIS 0.052587 0.045493 0.046991 0.042255 0.046706

994 SWIAR 0.010076 0.007904 0.008306 0.008363 0.008782

995 IDS EOL 0.025O21 0.02366 0.020073 0.018258 0.023229996 TOACCO 0.019227 0.029305 0.031211 0.031702 0.023150

997 OTUFOOD 0.112090 0.102311 0.098553 0.085969 0.106800

998 CLOTB 0.059759 0.059984 0.057932 0.051975 0.053559

999 JUTTT 0.001263 0.001200 0.001125 0.001392 0.001365

1000 LEATMER 0.013075 0.013340 0.011123 0.009690 0.014922

1001 FERTILIZE 0.007401 0.01;180 0.009029 0.008581 0.011493

1002 PRA31-CNZM 0.010509 0.009010 0.009e00 0.010450 0.009916

1003 MEIAL-PROD 0.035812 0.038362 0.025033 0.067512 0.0557881004 WOOD-OTg 0.032558 0.025883 0.027293 0.019444 0.0334091005 PZTUOLEWI 0.011092 0.007049 0.009423 0.006726 0.010671

1006 EL-GAS 0.033063 0.027663 0.022083 0.017292 0.033879

1007 TBP-SERV 0.026718 0.034157 0.032565 0.030207 0.0254941008 OUSING 0.104943 0.1207C6 0.156641 0.157866 0.1037661009 HBLTH 0.003492 0.005313 0.002823 0.004971 0.004100

1010 EDUCATION 0.022438 0.027588 0.023987 0.025388 0.021960

1011 TRADE-OTH 0.140032 0.173230 0.178866 0.190877 0.147408'012 * PER CAP CO 6097 6028 6369 11732 6065

.013

.014

1015 + RUR*L.0-300 RURAL.300-399 RURAL.400-499 RURAL.500-749 RURAL 750-999

1016

1017 RICE 0.292192 0.242729 0.272529 0.286138 0.275483

1018 MAT 0.078650 0.098462 0.072964 0.078282 0.0696:'6

1019 TEA 0.012318 0.003924 0.008260

1020 LIVETOCK 0.013035 0.031480 0.042563 0.032528 0.026463

1021 FIISIE 0.031552 0.044154 0.041233 0.041339 0.039962

1022 SUGAR 0.020017 0.009855 0.008962 0.007627

1023 EDIBLEOIL 0.032989 0.031297 0.029856 0.025865 0.023832

1024 TOBACCO 0.006644 0.014500 0.009927 0.014275 0.013700

1025 OTUFOOD 0.127232 0.150172 0.145497 0.122950 0.1126241026 CLOT 0.100979 0.046937 0.047999 0.052925 0.049867

1027 JUTETET 0.009849 0.004241 0.001447 0.001679 0.001414

1028 LEATHER 0.039179 0.005255 0.010361

1029 FIWSLIER 0.006147 0.015581 0.013360 0.010313

1030 PHARI-CRE 0.008698 0.007469 0.013992 0.011904 0.009328

1031 MEML-PROD 0.007308 0.004974 0.003674 0.011914 0.030363

1032 WOOD-OTH 0.088214 0.106421 0.061765 0.068808 0.056140

1033 PETROLEIM 0.021724 0.019239 0.019367 0.018317 0.016519

1034 ELGS 0.052653 0.070730

1035 TRP-ERV 0.016345 0.009952 0.008712 0.009789

1036 DOUSING 0.091412 0.067011 0.058074 0.044308 0.043497

1037 HALT! 0.006198 0.004839 0.005084 0.004128 0.003206

- 145 -

Data Tables

1038 EDUCATION 0.006271 0.003408 0.001283 0.003389 0.0044541039 TR0DEO-TH 0.077255 0.057641 0.098180 0.086386 0.106352

1040 * PER CAP CO 1657 1948 2245 2521 33191041

1042 + .RtAL.1000-1249 .URAL.1250-1499 RURAL.1500-1999 RIIAL.2000-2499 RURAL.2500-20991043

t 1044 RICE 0.285188 0.269181 0.271717 0.279302 0.2820231045 WET 0.063880 0.054200 0.047711 0.040799 0.0403561046 TEA 0.015890 0.007475 0.017221 0.012577 0.0101541047 LIESmTOCK 0.030159 0.032946 0.035863 0.041697 0.0460771048 FISHERIES 0.047632 0;044489 0.043885 0.044273 0.0454551049 SUGAR 0.010241 0.008381 0.008597 0.008089 0.0095181050 LDIBLZOIL 0.024092 0.022414 0.021571 0.020803 0.0213151051 TOBACCO 0.014988 0.013651 0.012802 0.012863 0.0131761052 OTFOOD 0.122458 0.112043 0.119514 0.115255 0.1189441053 CLOTH 0.052808 0.042684 0.049833 0.054798 0.0543021054 JUTETEXT 0.001122 0.000968 0.001108 0.001522 0.0010541055 LEATBER 0.0053986 0.007973 0.009493 0.015554 0.0067821056 FERTILIZER 0.011593 0.010037 0.011894 0.015917 0.0181321057 PHANI-CUl 0.013133 0.010986 0.011158 0.010983 0.0128211058 METAL-PROD 0.050747 0.029518 0.022916 0.030728 0.0319691059 WOOD-OTH 0.056161 0.050637 0.047349 0.043671 0.0409781060 PETROLEUM 0.016058 0.014728 0.014071 .013230 0.0135331061 EL-S 0.012159 0.040366 0.015408 0.022882 0.0135821062 TIP-SHRV 0.01=227 0.011414 0.011916 0.014814 0.0145201063 EOUSING 0.043967 0.044197 0.049147 0.055601 0.0567741064 HALTH 0.004402 0.003410 0.003503 0.003150 0.0032661065 EDUCATION 0.005296 0.005631 0.009878 0.008536 0.0116161066 1R1DE--TH 0.100404 0.161672 0.163354 0.132956 0.1336421067 * PER CAP CO 3454 3933 4284 4466 49581068

1069 + RURAL.3000-3999 UIRAL.4000-4999 RA"L.5000-5999 RURAL.6000- RURAL.AVERAGE1070

1071 RICE 0.266787 0.252759 0.193624 0.195386 0.2569551072 WHEAT 0.038368 0.031928 0.025143 0.027539 0.0457431073 TEA 0.011218 0.007419 0.004915 0.008802 0.0124341074 LIVESTOCK 0.040012 0.042972 0.028067 0.045072 0.0377311075 FISHERIES 0.043475 0.041661 0.025060 0.036284 0.0416661076 SUGAR 0.007669 0.007661 0.007276 0.008682 0.0086361077 EDILEOIL 0.020869 0.021627 0.016672 0.018077 0.021048

1078 TOBACCO 0.011932 0.010837 0.008196 0.013743 0.0127251079 OTIFOOD 0.103424 0.100405 0.075230 0.087060 0.1086491080 CLOTH 0.060323 0.057169 0.053336 0.068841 0.052531

1061 JUTEITHT 0.000996 0.001080 0.000552 0.001331 0.001147

1082 LEATIR 0.010562 0.008016 0.011422 0.011356 0.0112871083 FERTILIZER 0.013614 0.015609 0.016847 0.015668 0.015053

1084 PHANl-CHED 0.013883 0.010460 0.012935 0.017176 0.0123851085 TAL-NIOD 0.022550 0.024273 0.014674 0.034800 0.0300891066 WOOD-OTR 0.038190 0.032305 0.025549 0.028533 0.0439711087 PETROEM 0.012279 0.011096 0.009218 0.011194 0.013380

- 146 -

Data Tables

.088 EL-GAS 0.009364 0.012779 0.023650

.089 TRP-SERV 0.014597 0.007546 0.010141 0.013720 0.012888

.090 BOUSING 0.054208 0.064534 0.054765 0.076708 0.051596

.091 HEALTH 0.003177 0.003160 0.002667 0.006979 0.003775

1092 EDUCATION 0.017678 0.017532 0.006340 0.013161 0.012391

1093 TRADE-OTM 0.184794 0.230072 0.397369 0.247188 0.168069

1094 * PER CAP CO 5224 6212 6150 8496 4524

1095

1096

1097 + BANGLADESH.0-300 BANGLADESH.300-399 BANGLADESH.400-499 BANGLADESH.500-749 BANGLADESH.750-999

1098

1099 RICE 0.272792 0.239972 0.243344 0.283951 0.2749021100 WHEAT 0.073202 0.097323 0.066396 0.077871 0.0689281101 TEA 0.013404 0.015146 0.009584 0.007791 0.008425:102 LIVESTOCK 0.012084 0.031318 0.037688 0.032030 0.027090;103 FISHERIES 0.029323 0.043491 0.037323 0.041463 0.040468:104 SUGAR 0.053616 0.023805 0.008956 0.009117 0.007675

1105 EDIBLEOIL 0.031305 0.031104 0.026738 0.025920 0.0243131106 TOBACCO 0.006149 0.014232 0.009461 0.014527 0.0142611107 0THFOOD 0.119539 0.146983 0.131673 0.123361 0.114259;108 CLOTH 0.093457 0.047633 0.043101 0.052187 0.0503291109 JUTETEXT 0.008930 0.004232 0.001323 0.001645 0.0014241110 LEATHER 0.0J5126 0.005621 0.010321

1111 FERTILIZER 0.006106 0.013969 0.013227 0.0103931112 PIARM-CHED 0.008050 0.007707 0.012552 0.011901 0.0095621113 METAL-MOD 0.006763 0.005012 0.003321 0.012454 0.029897!114 WOD-OTH 0.081642 0.103787 0.055686 0.067911 0.0561071115 PETROLEUM 0.021033 0.019332 0.017255 0.018294 0.0167101116 EL-GAS 0.031050 0.050799 0.0655331117 TRP-SERV 0.016237 0.010;05 0.009193 0.0110351116 80USING 0.084467 0.068359 0.052302 0.045296 0.0453111119 BEALTH 0.005937 0.004808 0.004707 0.004272 0.0032181120 EDUCATION 0.005804 0.003385 0.001150 0.003542 0.004427:121 TRADE-OTB 0.072502 0.068029 0.087099 0.087625 0.1054121122 * PER CAP CO 1790.51 1961.32 2504.11 2642.27 3299.72:123

:124

:125 + BANGLADESB.1000-1249 BANGLADES. 1250-1499 BANGLADESH.1500-1999 BANGLADESH.2000-2499 BANGLADESH.2500-2999:126

1127 RICE 0.268649 0.261567 0.261210 0.265965 0.2630991126 WHEAT 0.050038 0.052508 0.045998 0.039952 0.038960

:129 TEA 0.013962 0.007593 0.015714 0.011458 0.0094081130 LIVESTOCK 0.029583 0.033134 0.035547 0.041454 0.0460981131 FIS"IMMES 0.045713 0.044580 0.043472 0.044521 0.0453351132 SUGAR 0.009731 0.008265 0.008382 0.008011 0.0091751133 EDIBLEnIL 0.023469 0.022606 0.021471 0.021066 0.0212711134 TOBACCO 0.015188 0.014451 0.013122 0.013476 0.0138021135 OTBFOOD 0.117334 0.112193 0.117477 0.113674 0.1161121136 CLOTH 0.049717 0.043063 0.048718 0.053979 0.0539761137 JUTETXT 0.001114 0.001006 0.001099 0.001454 0.001135

- 147 -

Data Tables1138 LEATHER 0.005985 0.008792 0.009760 0.015427 0.0095131139 FERTILIZER 0.010991 0.010690 0.011545 0.015415 0.017337:140 PHAB4-CHUM 0.012341 0.010835 0.010872 0.010535 0.0118941141 tMTAL-PROD 0.046418 0.030689 0.022936 0.030309 0.0291811142 WOOD-OTH 0.052968 0.049727 0.045864 0.042923 0.0394831143 PETROLEUM 0.015373 0.014604 0.013717 0.012994 0.0129151144 EL-GAS 0.061105 0.051982 0.041450 0.045154 0.035792:145 TRP-SERV 0.012061 0.011777 0.012711 0.015220 0.0159121146 HOUSING 0.044029 0.047146 0.050875 0.058421 0.0609501147 HEALTH 0.004284 0.003521 0.003450 0.003022 0.0032401148 EDUCATION 0.005327 0.006149 0.009940 0.009067 0.0120631149 TRADE-OTH 0.095620 0.153122 0.154671 0.126503 0.1333491150 * PER CAP CONS 3639.17 4008.31 4413.57 4598.98 5172.46:151

1152 + BANGIADESH.3000-3999 BANGLADESH.4000-4999 AOGLADESH.5000-5999 BANGLADESH.6000- B4GLADESH.AVERAGE11531154 RICE 0.246925 0.214371 0.185059 0.168473 0.2417651155 WHEAT 0.036995 0.028086 0.024669 0.023864 0.0427821156 TEA 0.010106 0.006750 0.006184 0.007988 0.0113681157 LIVESTOCK 0.041258 0.047336 0.036774 0.051031 0.0392791158 FISHERIES 0.044305 0.041971 0.031735 0.037886 0.0416731159 SUGAR 0.007911 0.007502 0,007776 0.008528 0.0085371160 EDIBLEOIL 0.021388 0.021709 0.018220 0.018021 0.0210001161 TOBACCO 0.012772 0.014910 0.013606 0.017663 0.0138191162 OTHFOOD 0.103029 0.099259 0.083755 0.086247 0.1064781163 CLOTH 0.059054 0.056921 0.056147 0.063780 0.0517271164 JUTETERT 0.001029 0.001133 0.000827 0.001454 0.001173165 LEATHER 0.011272 0.010599 0.011676 0.011130 0.012580

1166 FERTILIZER 0.012840 0.014376 0.016507 0.014303 0.0142361167 PHARA-HCU 0.013014 0.009761 0.012390 0.015796 0.011832;168 IETAL-PROD 0.024628 0.028221 0.010464 0.047640 0.0343371169 WOOD-OT? 0.036429 0.029733 0.026804 0.025922 0.0416471170 PETROLEUM 0.011798 0.009838 0.009492 0.010070 0.0127261171 EL-GAS 0.035104 0.032616 0.023181 0.022048 0.0402891172 TRP-SERV 0.016856 0.017100 0.016945 0.019044 0.0151971173 HOUSING 0.062510 0.080060 0.083965 0.098521 0.0583661174 HEALTH 0.003180 0.003854 0.002787 0.006384 0.0037741175 EDUCATION 0.016257 0.020268 0.011606 0.016458 0.0140971176 TRADE-OTH 0.169341 0.203537 0.301631 0.227849 0.1613171177 * PER CAP CONS 5474.15 6809.38 7972.21 9253.87 4785.971178

1179

- 148 -

Parameter and Variable Declarations and Assignments

11811182 PARAMEM A(CIJ) 1084-85 NU-OUPUT COEFFICIET VW BANLAEH (WITLESS)1183 AX(I) OIUTIROW FUNCOK RIGN? (UNITLESS)1184 T(I) XCISE TAX RATES (UNITLESS)1185 MF(I rINAL IMPORT TARIFF RATES (UNITLESS)1186 INFW(I) FimL MPTS LD RCS (TX PER UNIT)1187 AMF(I) S1URE OF FINAL . RSS IN FINAL ODIID (UNITLESS)1188 RW(I) ILD NTWRMDIATl IMORT PRICES (TX PER UT)1189 Tt7(I) IrNTIDIAZ UDEPRT TARIFF RATES (UWITLESS)1190 A(I) SHAR OF INTE IATE ImRTS IN OUTPUT (UWITLESS)1191 F(I) FIXED FIInL D D (BILL UNITS)1192 ALPA(I) FACTOR SIARES (UNITLESS)1193 BETA(I) COMSIIMPTION SBARIS (UNITLESS)1194 ETA EXEST ELASTICITY (UNITLESS)1195 PHI FACTOR SUPPLY ELASTICITY (UlNITLESS)1196 AS AVEP GE PROPEITY TO SAVE (UNITLESS)1197 EC0I) IN' UL EZOT DEAIwD (BILL UNITS)1198 POCI) INITIAL XCRT PRICES (TX PER UNIT)1199 FX(I) IITIAL PRIODUCE PRICES (TX PER UNIT)1200 VO TOTAL BASE FACTOR SUPPLY (BI UNITS)1201 REVO BADE YEA REVENiUE (BILL TANA)1202

1203 VARIABLE X(I) DORUTIC PRODUCTION (BILL UNITS)1204 PXCI) P UCE PRICES (TX PER UNIT)1205 W(I) VALUE ADDED ASGREGATE (BILL UNITS)1206 PY VALUE ADDED AOGEGRATE PAICES (TK P£R UNIT)1207 Q(I) INTEMHAED AonESMATE (BILL UNITS)1208 PO(I) INTURMDIA!E AOGMSnE PRICES (TK PER UNIT)1209 P(I) COESIUM PRICES (TX PER UNIT)1210 CPI CQYUME PRiCE INDEY (TX PER UNIT)1211 CONS(I) PRIVATE CONSUMPTION (BILL UNITS)1212 E(I) EZRTS (BiLL UNITS)1213 Y IO8SEOLD ImCaU (BILL TAKA)1214 PT(I) DOMESTIC OUTPUT MURAYT PRICES (TX PUR UNIT)1215 RT(I) INCREA8 IN ECIS TX RATES (PCENTAGE POINTS)1216 REVENUE TOTAL EXI8E AND CDST REVENUE AT FXDM PRICES (BILL TAXA)1217 UTILITY PRIVATE WELFARE (UTIL8)1218 MP(I) FINAL DHOTS (BILL UNITS)1219 ICII) INTIEDITES I"MORTS (BILL UNM)1220

1221 POSITIVE VARIABLE X.PX,V,PV,Q,PQ,CO.,E.MO,P,MF.CPI,REVEUE.PT12221223 *CALIBRATION ASSUMPTIOIS

1224

1225 ETA - 3 ;P 5;1226

1227 PQ.L(I) - 1 ; PV.L - 1 ; P.L(I) - PQ.L(I; ; CPI.L - 11228

1229 A(I,J)SIOCT(OTALl,J) - IO(I,J)/IO0"TOTAL1",J)

1230 TMI) - IOt(Z1CISE",I)/IOCT0TAL2",I)

- 149 -

Parameter and Variable Declarations and Assignments

1231 PX.L(I) - PQ.L(I)/(1+T(I))

1232 PXO(M) - PX.L(I) ;

1233 F(I) - I0(l."IWVZST") + 10(Z"iPUBLIC") + lO(I.STOCK")

1234

1235 MF.L(I) - IO(I.D!5") + XO(I,ST IRNL") + IO(I,CDMPUAL")

1236 TCF(I)SMF.L(I) - (IO(I.MCDFIAL") + ZO(I.'STFlNAL"))/IO(Z.9IHPQRTS")

1237 PMFW(I) - P.L(I)/(l+TM(I))

1238

1239 EOMI) - IO(l."flMTS-)

1240 E.L(I) - EO(I)

1241

1242 X.L(I) - I0("TOTAL",I) Q.L(I) - IO("TOTALI".I)

1243

1244 TMQ(I)SIOVj0 NTERM-ZMF.I) - CIO(rDUTY".I)+IO("SALES .1)X)/IO(ISRTU-HPn",I)

1245 PMQW(I) - I.L(I)IC1+TCI));

1246 MQ.L(I) - IO("'INTEHM-DWF,I)/PHWA(I)

1247 AM(I) - MQ.L(I)/XIL(I)1248

1249 ALPHA(I) = PQ.L(I)*QL(I)I(FXL(I)*XL(I)-PX.L(I)tML(I));

1250 CONS.L(I) - IO(I."TOT-CMIS");

1251 BETAI) - CONS.L(I)/SUIJ(J, COS.L(J))

1252

1253 V.L(I) - (l-ALPHA(lI))*PX.L( .)*.L(Il)-H.L(I))lPV.L

1254 VO - SUN(I, V.L(I))

1255

1256 AX(I) - X.L(I)/(Q.L(I)**ALP&(I)*V.L(I)**(l-ALPRA(l)))

1257 PO(I) - PQ.L(I) ;

1258 Y.L - SUMCI, PV.L*V.L(I))

1259 AS - SUM(I. PV.L*V.L(I) - CONS.L(l))/Y.L

1260

1261 AMWI) - MF.L(I)/(CONS.L(I) + Ftl) + E.L(I))

1262

- 150 -

t4odel DefintionM011264

1265 WATIR C1) can D AM TIOU FUNTIONS (DIL UNITS)1266 "T(I) UtIINAfTON Ow IUTUDIA! DTS (BILL UNITS)1267 Fm8Q(i) FQT WaU oDIDTto FR Q (DILL TAXA)

1268 S(I) F MRST MU C ItION FMO V (BIL TAXA)1269 PiTMM) DIE 2IW oF PT (TX PER UNIT)1270 1)ZF(l) _IASTJION oF PQ (TX PU UNIT)1271 11L) 1T 4ZARI (DILL UNITS)1272 VCLEt FACJUO KUM CULURDM (BILL UNISTS)1273 MS(I) UTumarlo or FM" amucT PlRICE (TX PR UNIT)1274 CPIDZT DSTIINATin OF CS (BILL TAEA)1275 11W PAIV I3 T DETERMIATION (DILL TAKA)1276 CMtI) CO"UUMWT DITUNATION (BILL TAEA)1277 ZDZSI) ORT DKTUNICIOt (DILL UNITS)1278 tIU () DISITZ o r OFFAL DWTS (ILL UTE)1279 RSYT DITZWMATION OF TOTAL RElEUE AT FD PRICE (DILL TASA)1280 033 0JECTM rUNCTION (UTILS)12811282 PROtI).. XtI ) -3' hX(I)tO(I)**ALPBA(I)-V(I)**(-.ALPtA(l))12831284 HODEStI)8IO"nTI-P".I).. M(I) -E' At4(I)'X(I)

1285

1286 FIRSTQ(I).. IQI)Q(I) -1 hLtAI)-tlX(I)'X(I) - Nl*tl)*1+S"XMI)) tI));

1287

1288 FIRSTVI).. PV.V(I) -I- (1-ALPA(I))*(PX(I)*X(I) - PHt)W*(141+7M l)*)))1289

1290 PTDESTI).. PTI) -i- PXCI)(t+T(I)+(RPT(I)I100)SIT(I))

12911292 PQDW(I).. FQ(I) -Ew SUHtJ, A(J,I)*PT(J))

12931294 EQU3tI)M.. XtI) + MMI) -Zo 5UH(J, A(I.J)*Q(J)) + CWStl) + FtI) + EtI)1295

1296 VCLIAR.. 81ltI, VMI)) -E- VO*(P/CPI)**MP

1297

1288 PMT(I).. PCI) -s (1 - AhF(I))*PT(I) + AMW(I)*PW(I)*(l+THF(I))12099

1300 CPIDET.. tPIlM(I,. CONSI)) 3M 5UM(. PI)*COSl))

1301

1302 IDEP.. Y -Z- 5UM(1. PYV(I))

1303

1304 CDT(I)$IO(I,TO-C=N").. P(Z)*COSCI) -E- ZTAt(I)*(1-AS)*Y

13051306 EDZT(I)SE0(I).. E(I)/ZO(I) wEZ (P(I)/P0(I))**ETA

1307

1308 ITCI)SIOCI,DinS)..0 AMH(I)*(CSI) + Ft) + EtI))13091310 REYDET.. REVZEUE -I- 8UMtl, T(TI)+(RTtI)/100)8IT(I))*PX0l()*X(t) +1311 bQI)*PllptI)'IQtl) + TMI)-PIWI)'M (I))1312

1313 03W.. UTILITY -Z- PROD(18IOtI."TOT-CON"). tUS(I)**"ETAMI))

- 151 -

Model Definition1314

1315 OIYEL 3AIMA I ALL /

1316

1317 CONS.P(X)8(NOT IO-I."TOTXUS")) ' 0

1318 HO.FX(I)8(WT zOc"zMm-D".n - 0

1319 Z.Px(I)$tNOT ZOCK)) - 01320 MF.1X(I)SCUOT I0CI."DQ1S")) - 0

1321

1322 OPCIt ULP - UOS5 ;

1323

1324 SOLVE EBA1.A OAXDUZ1MN UTIIZTY US1N .P;

1325

1326 REVO - REYENUZ.L

1327

1328 * CEM= COSISThSTY - TOAL SAVIS IML ZnEO

1329

1330 * PARAHEUf TOTSAV

1331

1332 * TOTSAV - AS*Y.L + 351(1, (l.14uZC).3qUCI)Q.LC1) + 2CZ)*PX.LlI)*X.L(I) +1333 ^l14fi(I).Hww(Z)qw.L(I) - P.L(I)ICI) -

1334 * 1.L(I)q.LCI))

1335

1336 * DISELAY TOTSAV

1337

- 152-

Revenue Calculatlofs13391340 PARM= IUDTAXO mu- uW M ZIRECT TAX RVEME1341 IuDzAX PM-wuiim IDr= TAX REVNU

1342 DIDA IRENUE cm= IN M E= TAX REVE

1343 RUDX 3IwO CIU c11 IN lMlDIRECT tA REVENUE

1344 PY'TA 'UOEWPR C Z IN INDInM CT TAX REMVNUZ AT MU YEAR JICES1345 ul;tIo M1: UCIS Z:1E TAX RV Z1346 EXIS IS-"UN2T I I TAX RVNE1347 DZXCI5X PURCETS CNGE IN E 5CISE TAX REVNU1348 P=CIS PUCNTI CAUS IN RA =CS TAX REENE1349 PRZCIE PCENTAGE CRAN IN MtCISE TAX EVE AT AS TER PICES

1350 eCSO ?-UkTFRIN COST RVWUE

1351 CDST OS-ERIMlNT CDST RVN

1352 DDSS PERITAE CRANGE IN CDST REMVUE

1353 RCDST PCEN IE CROWE Z RZAL CDST REMVEUE

1354 P CDS1 PUCZNTG CRIOW IN CST REVENUE ATRE BAES R TM ICES1355 SAWO 1-EYC RiIN FGEEIN SAVINGS1356 SAVW POT-URIEET WZIQI SAViNGS1357 DSAVF UCENTAGE CRINE IN IGEIQI SAVINGS

1358

1359 ECISEO - WUNCI, ZoREZWE",I))1360 EXCISE - SUNI, (T(Z.(R?.Ltl)/100)8Z?Ct))- IC.L(I)*.LCI))

1361 DEXCISE - 100'(Z(UCISZ-ZXCISZO)/XCISO

1362 REXCISE - lO *tECISE*M(I, POCI)*Pt))/O l, P.Ltl)*FtS))1-1)1363 PRECISE - lOOC* (S(l, C?(I )(RT.LCIfl1OO)$IS(l)*XL.l)l 1*IOtEISE",l)IIOCTOn 1) ))-EOS) lSEO13641365 CDSTO - 61314(1, Ol O C",l)ZS'Z, +I0(I."C l),IO(I.S8 "));1366 COST - SM(l, I )*D()dIm.LCZ) * D1()*PWW(I)W.L(I))1367 DCDST - 200*(CDST-ODQ)/CDTO;

1368 RC? - 100*(CDST*S x, POI)' FPC))/(CDtOStCI, 1.LC l)))-t )1369 POCST - DCOST

13701371 InTAXO - ZXCISEO + CDSTO

1372 INDTAX - EXCIE + CMT;1373 DINDOX - IO0*{(nDX-ND?AO)INDTA1XO1374 RInOT - 100*(IJRD2AZ8WtI, PO(1V?(I))/(IND S IT, P.L(I)'V(I)))-1)

1375 PIUOTAX - 100*CSIT(L, +I C).CU?.LC)J1 00)6 SSCl)*X .LI)E'I)IOc".I)l2".I))) CDST - rAO)MTAXGO

1376

1377 SAVFO - 6MU1l4, IOt(INTEM-IMP".I) + 2O(I,DMTS") - IO(I.'EKPORTS'))

1378 SAVF - 8Utl(1, IQ(I)*M.L(t) P S()'P.LI) - P.LCI)*E.L(I))

1379 DSAYF - 0O*(SVF-SZAFO)/SBAO;

1380

1381 DISPLAY EXCISEO, EXCISEE, MXCISZ, MEOCISE. TCISE, COSTO, COST, DCDS, R TD81, KM:ST1382 INDUXO , IND , DvINDEX, RINoTAX, PINOTAX, SAVFO, SAW, SAW

1383

- 153 -

Socio-Economic Total Incidence1385

1308 PARAHMT INCO(SC) IE- RUlN? NCUSMIZ BY SOCIO-KOIIIC CLASS

1387 IpC(SC) POST-EIPUMT INCU by OC0-ECOlIC CLASS1388 DI"C(SC) PRITAE CHAPGE IN INCU B SCO-ECHUEC CLA

1389 CONISUIMO(SC) H-DXM_T VALUE OF WU11UWTIOE BY SOCIO-ECVUWIIC CLASS1390 C*nMH(SC) 'T-UPDT VALUX Of CMS3TC U SIO-EOOMOMC CLSS

1391 DCOSUMP(C) PIICENA CHAIE IN CONSUWON BY UOCO-ZCOIIC CLASS

1392 SAVOM SC) HES--UIDIS SAVINGS BY SOIO-lIC CLASS1393 SAV(Sc) POST-UXPDR T SAVINS BY SOCIO-LOOMHC CLASS

1394 DSAV(SC) FUCENTAGE CHAPGE IN SAVINGS DY SOCIO-ZCOS C CLASS

1395

1396 JICO(SC) - SUHI(, VASARE(SC,I)*Io0'VALUE-A)D".I)) + OTHIUUMCSC);

1397 CONSUMPO(SC) - SUtUI, SCCS(I.SC));

1398 SAVO(SC) - IHCO(SC) - aOOSUMPO(Sc)1399

1400 INC(SC) - SUCI(. VASRARE(SC.I)*PV.L*V.L(I)) + OTUINCRM(SC)

1401 CONSUMPNSc) - SUMI(. P.LCI)*SCCMfSCI,SC))

1402 SAV(SC) - INCCsc) - CtUW(SC)

1403

1404 DINC(SC) - 100*CINCCSC)-IwCO(SC))/IICOCSC)1405 DCONSUMP(SC) - 10O*(CMHRSWH(SC)-CMS)UQO(SC))/COUS POCSC)

1406 DSAV(SC) - 1O0*(SAV(SC)-3AV0CSC))ISAV0(SC)1407

1408 DISPLAY INCC,INC,DINC,CONSUIP0.CONS11.DCSU,SAVO,SAV,DSAV

1409

1410 PARAM TUt8 (SC) POPULARIOP BY 80IECO2SKC CLASS/

1411

1412 LANDLESS 20.13. SULL 11.55. MaUne-T 11.59, 3EI1l-0 13.04. LARGE 10.221413 LARGEST 4.21, RUR-IF 10.55. MM-FM 7.04, URB-lNF 7.02, M-PR, 4.66 l14141415 PARAMET BETASC (I,SC) BASE CQ1S8WIO SHAKES BY S0CI0OMUC tOP

1416 UTILO(SC) BSE PIR CAPITA UTILiTY BY S0CIOC0001C GROUP CUTILS)

1417 UTILtSC) NEW PUR CAPITA UILITY BY SOCIOECOUOHIC GROUP (UTILS)

1418 DUTIL(SC) PEECENTAE CHANGE in UTILITY LIVE. UY SOC2OtCUISC GOUP

1419 mU WEIGHT IN SW FMF PA EE OF POOR1420 DSWF R2AVE CHAM IN SW

1421 DRAWL RZLATIVE CHU IN EII8AWS2AN SW

1422 INCI RATIO E NDRAWL AND D8WF

1423

1424 BETASC(I.SC) - SCCOlS(I,SC)/StUM(J, SCOISS(J.$C))

1425 UTILO(SC) - 1KODCISOCOS(I.SC). (CDTASC(X.SC)*(n=C0(SC)-SAVOtSC)))**JZASCCI.SC))/NCSC)

1425 UTIL(SC) - PROD(ISSCtONUS(I.C) , (ETASC(I,SC)*INC(SC)*(l-SAVO(SC)/IC0C(SC))/P.L(I) )**ETASC(I.SC) )/NCSC)1427 DUTILtSC) - 100*(UYIL(SC)-UTILOCSC))IUTILO(SC)

1428 MU - -1:1429 DM5W - 100*(CSUNSC, P(SC)*UTILCSC))/SBICSC NlSC)*USILOSC))-1)

1430 DRAWL - -100*(SUM(SC, N(SC)*UTILCSC)**MIU)/SWl(SC. (SC)*UTIL0CSC)**MI)-1)

1431 INCI - DRAWL/DEW?

1432

1433 DISPLAY UTIL, UTILO. DUTIL, DSOW. MRWL. MNCI

1434

- 154-

Price Incidence bY Income Class

1436

1437 PAPAMUI6 CPlOl(U.K) cWnh1U IUCI MIDiCnS By 1081-82 135

1436 CPI$3(U.K) C0SU PRSCZ ID2ICUS BY P1LIMZUASY 1983-64 EZ8

1439

1440 CPIS1aU.X) - 100*(SI(I. P.L(I)*-M81(I.U,E))-1;

1441 CP183(U.K) - 1OO^(1WI(I. 1.L(Z)*83(l,V.E)-1)

1442

1443 DISPLAY CPISI.CITS3

- 155 -

APPENDLA 4.2

Technical Documentation of Model Data

This appendix documents the data used in the revenue estimationmodel for Bangladesh. The appendix contains a complete listing of all dataand the model.

A. Data Sources

The data for the model came from five sources:

- The 1976-77 input-output table as documented in volume -I of the Background Papers of the Second Five Year Planof Bangladesh;

- A base run of the Applied General Equilibrium Model(AGE) for the Third Five Year Plan of Bangladesh, askindly supplied by the Bangladesh Planning Commission;

- A mapping between the Bangladesh Household ExpenditureSurvey (HES) 1981-82 and the preliminary HouseholdExpenditure Survey 1983-84, and the 47 sectors of the1976-77 input-output table, as kindly supplied by theBangladesh Bureau of Statistics;

- Bangladesh Fiscal Statistics , 1972/73-1985/86;

- Monthly Advance Release on Foreign Trade Statistics,Bangladesh Bureau of Statistics.

B. PreDaration of Data

In order to have a consistent data set for the model base year,1984-85, a matching between the 47 sectors of the 1976-77 input-outputtable and the 39 commodity groups of the AGE was carried out. Theproduction value figures from the AGE were adjusted to contain eachsector's production for own use, using coefficients from the 1976-77 input-output table. Also, the AGE's data on net imports were adjusted to reflectgross trade flows, using the Foreign Trade Statistics, and imports wereattempted to be split into intermediate imports and imports for final use,assuming that the share of final imports in total imports of a particularsector was identical to the share of final demands in total output of thatsector. Finally, the actual collection of excise duty, customs duty andsales taxes by commodity, as reported in Piscal Statistics, Tables 15 and21, were matched to the 47 sectors, and trade taxes were allocated tointermediate and final imports assuming the same rate for both uses.

The resulting data for value-added, tax collections, domesticproduction, and intermediate inputs, as well as final demand and importsfor final use, were used as control totals to update the 1976-77 input-output matrix to 1984-85 using a modified RAS algorithm. The resultinginput-output table was then aggregated to the 35 sectors of the model.

- 156 -

S ~~~~~~~~~~APPENDIX 4.3

Analysis of Revenue and Incidence by Sector

This appendix presents some results on revenue and incidence fromthe model. Specifically, the model was asked the question: what is thenecessary increase in ad valorm excise taxation of a given sector whichwill raise a net additional real indirect tax revenue of 1 percent (or Tk230 million at 1984/85 prices)? The efficiency and distributional effectsof such a change were then examined.

Two things should be noted about these experiments. First, toraise an additional 1 percent in total requires raising more than an extraTk 230 million (1 percent of Tk 23 billion) from the sector in questionalone. This is because of all the crowding-out effects that occur on theexcise tax base of other sectors as well as on the CDST base, as describedabove. Second, the demand for an additional 1 percent at constant pricesmeans that the results can be compared across sectors: in all cases, thegovernment drain on the economy is the same. Thus, if the requiredincrease of the excise tax rate is 1 percentage point in one sector, and 10percentage points in another, it is immediately clear that the firstsector is more effective in raising revenue. It need not be the morepreferable instrument, however, because its inherent welfare cost or itsdistributional consequences may be undesirable. The results are summarizedin Table 4.1.

Column (1) shows the percentage increase in the ad valorem excisetax rate that will raise net indirect tax revenue by 1 percent. Column (2)reports the change in real income arising from the change noted in Column(1). Column (3) shows the resulting change in the consumer price index.Co?umn (4) records the movement in the trade gap induced by the effect ofexcise taxation on imports and exports, while Column (5) reports theresulting change in CDST revenue.

Column (6) is an amalgam of income and expenditure effects bysocio-economic class, and CPI changes by income group. A plus (+) meansprogressive, zero (0) indicates neutrality, whereas a minus (-) indicatesregressive incidence. A question mark (?) signifies that the variousincidence measures conflict with each other. As an example, excisetaxation on metal products to raise au additional net revenue of 1 percentleads to real income reductions across socio economic group and relativechanges in consumer price indexes by income groups as reported in TablesIII.2 and III.15 respectively. Since the incidence pattern is progressive,Table 4.1 records a n+1 in the metal products row. Relevant details forthis and other sectors are provided in Tables III.1 to III.20 in thisappendix to allow readers and policymakers to arrive at their ownjudgments.

- 157 -

Table.1: Effects of Ch nging Sectoral Excie TSax Rates

(1) (2) (3) (4) (5) (6)Relative Relative Relative Relative

change Change Relative change chbas

excise In real change In trade COST Distribution

tax rate lncom In CEu sapa revenu effect

(2 point) (2) (2) (2) t) (SiMn)

Edibl Oil 3.28 -.32 .22 -.21 -.21

Sugar 5.47 -.55 .11 -.27 -.72 0/+

Other food 3.80 -.40 .17 -.24 -.19 ?

Tobacco 11.95 -.46 .45 -.08 -.16 +

Petroleum .55 -.27 -.20 -.19 -. 17 ?

Cotton yarn 4.52 -.37 .16 -.23 -.32 0/l

Cloth 1.38 -. 39 .14 -. 25 -.29

Jute textile 4.36 -1.53 -. 99 -. 93 -. 71 _

Pbarmaceut/

Chemicals 2.55 -. 25 .18 -. 16 -. 25 +

Paper 9.38 -. 25 .11 -. 12 -. 26 +

Metal products 1.22 -. 04 .04 -. 03 -. 03 +

Cement 12.79 .00 .03 -.02 -.18 +

Fertilizer 3.46 -. 40 .16 -. 24 -.16 ?

El-gas 3.56 -. 16 .04 -t10 -. 11 t

Wood and

other indust. 1.60 -. 22 .09 -. 13 -. 33 ?

Transport

service 1.29 -. 38 .12 -. 23 -. 20 +

Trade and

other serv. .35 -. 37 .11 -. 22 -. 22 +

Note: (1) An explanation of the columns is provided in the text.

(2) The change in real lncem in colam (2) is the chag in Incom* which, at

pre-tax prices, would leave the household as well off in the post-tax

situation. Thus a negative number lndicates a worsening in the houshold's

circumstances as a result of increasod taxatlon.(3) The Ceh In colnum (3) is a consumption-weightd pricle index.

- 158 -

Among other things, Table 4.1 shows that a number of excise taxesfeature desirable properties: they are effective at raising revenue, arefairly inexpensive in terms of private welfare, have little effect on thetrade balance, and may even exhibit progressive incidence. Most notable isthe case of the metal products sector, whiich covers excise taxes on mildsteel products, gold and silver products, metal containers, wires,vehicles, welding electrodes, steel cutlery, G0I. pipes, and nuts andbolts. On the other hand, a number of sectors behave differently. Thetable shows that a tax on the jute textile sector is socially costly. Tnisis because it is very export intensive, so that the main effect of taxingthe sector is to reduce export competitiveness.

Finally, Table 4.1 indicates that the various measures ofincidence are in conflict with each other for a number of sectors. Forthese, it may be useful to look at the more disaggregated informationpresented below.

Disasgreaated Information

Table I11.1: Base Per Capita Relative Real Incomeby Socioeconomic Group (Relative to Weighted Average Across Groups)

Landless Rural 0.915Small Farmers 1.018Medium Farmers (Tenants) 1.015Medium Farmers (Owners) 1.079Large Farmers 1.109Largest Farmers 1.204Rural Informal Sector 0.903Rural Formal Sector 1.097Urban Informal Sector 0.766Urban Formal Sector 1.064

Table ITI.1 reports the real income levels of the socio-economicgrou±ps in the base year. The numbers are presented as ratios to theeconomywide average, where the latter is weighted by the population in eachgroup.

- 159 -

Table IIL.2: Percentage Change in per Capita Real Income Levelby Socioeconomic Group a/

Edible Sugar Other Food Tobacco CottonOil Products Yarn

Landless Rural -0.333 -0.533 -0.354 -0.508 -0.371Small Farmers -0.337 -0.555 -0.398 -0.499 -0.418Medium Farmers (Tenants) -0.346 -0.572 -0.413 -0.502 -0.403Medium Farmers (Owners) -0.343 -0.587 -0.455 -0.496 -0.388Large Farmers -0.351 -0.615 -0.458 -0.500 -0.352Largest Farmers -0.349 -0.642 -0.497 -0.491 -0.336Rural Informal Sector -0.274 -0.430 -0.274 -0.404 -0.339Rural Formal Sector -0.236 -0.378 -0.297 -0.380 -0.233Urban Informal Sector -0.233 -0.267 -0.210 -0.410 -0.289Urban Formal Sector -0.236 -0.344 -0.312 -0.374 -0.305

A/ It is to be understood that excise taxes on items in each column areincreased to raise net additional real revenue equal to 1 percent ofindirect tax revenue at 1984/85 p.ices.

Table III.2: (Continued)

Cloth Jute Pharmaceutical Fertilizer PaperTextiles and Chemical and

Products Pesticides

Landless Rural -0.377 -1.531 -0.254 -0.407 -0.235Small Farmers -0.421 -1.494 -0.258 -0.427 -0.246Medium Farmers (Tenants) -0.403 -1.392 -0.271 -0.432 -0.265Medium Farmers (Owners) -0.392 -1.405 -0.268 -0.418 -0.259Large Farmers -0.357 -1.406 -0.274 -0.408 -0.266Largest Farmers -0.343 -1.428 -0.272 -0.380 -0.267Rural Informal Sector -0.514 -1.003 -0.238 -0.378 -0.209Rural Formal Sector -0.236 -0.581 -0.198 -0.266 -0.200Urban Informal Sector -0.345 -1.743 -0.187 -0.271 -0.168Urban Formal Sector -0.295 -0.967 -0.211 -0.276 -0.192

- 160 -

Table 111.2: (Continued)

Cement Metal Electricity Petroleum Wood andProducts and Gas Products other

Industries

Landless Rural 0.004 -0.033 -0.173 -0.279 -0.187Small Farmers 0.003 -0.033 -0.179 -0.282 -0.198Medium Farmers (Tenants) 0.004 -0.034 -0.176 -0.303 -0.210Medium Farmers (Owners) 0.008 -0.034 -0.170 -0.300 -0.208Large Farmers 0.009 -0.037 -0.166 -0.300 -0.227Largest Farmers 0.016 -0.047 -0.159 -0.292 -0.232Rural Informal Sector 0.005 -0.034 -0.149 -0.254 -0.227Rural Formal Sector -0.021 -0.033 -0.108 -0.220 -0.197Urban Informal Sector 0.036 -0.030 -0.095 -0.180 -0.163Urban Formal Sector -0.015 -0.044 -0.119 -0.209 -0.192

Table III.2: (Continued)

Transport Trade andand other

Communication Services

Landless Rural -0.377 -0.363Small Farmers -0.409 -0.391Medium Farmers (Tenants) -0.430 -0.402Medium Farmers (Owners) -0.417 -0.391Large Farmers -0.405 -0.394Largest Farmers -0.391 -0.386Rural Informal Sector -0.355 -0.331Rural Formal Sector -0.260 -0.261Urban Informal Sector -0.226 -0.227Urban Formal Sector -0.248 -0.260

- 161 -

Table I1I.3: Relative Change in Total Real Income (percent)

WithNo Distribu- Social Concern

tional Concern about Distribution

Edible Oil -0.316 -0.313Sugar -0.517 -0.507Other Food -0.378 -0.366Tobacco -0.471 -0.471Cotton Yarn -0.358 -0.358Cloth -0.380 -0.386Jute Textiles -1.333 -1.374Pharmaceuticaland Chemical -0.250 -0.248

Fertilizer andPesticides -0.385 -0.384

Paper -0.237 -0.234Cement 0.004 0.006Metal Products -0.035 -0.034Electricity

and Gas -0.158 -0.157Petroleum

Products -0.272 -0.269Wood and Other

Industries -0.204 -0.202Transport andCommunication -0.371 -0.367Trade and other

Services -0.356 -0.352

- 162 -

Table III.A: Relative Change in Consumer Price Indicesby 1981-82 and 1983-84 HES Group: Increasing Excise Tax on Edible Oil -/

MonthlyIncome ---- HES 1981-82 ------- ------ RES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.199 0.194 0.194 0.326 0.229 0.222300- 399 0.225 0.194 0.195 0.225 0.229 0.228400- 499 0.200 0.191 0.191 0.224 0.231 0.221500- 749 0.198 0.197 0.194 0.222 0.214 0.214750- 999 0.203 0.198 0.194 0.217 0.208 0.2091000-1249 0.208 0.202 0.200 0.221 0.209 0.2071250-1499 0.211 0.203 0.200 0.218 0.208 0.2081500-1999 0.208 0.205 0.204 0.220 0.210 0.2092000-2499 0.208 0.208 0.207 0.219 0.207 0.2072500-2999 0.209 0.206 0.206 0.218 0.209 0.2083000-3999 0.208 0.207 0.205 0.218 0.207 0.2074000-4999 0.202 0.204 0.203 0.213 0.210 0.2095000-5999 0.207 0.207 0.199 0.208 0.198 0.2016000- 0.197 0.189 0.191 0.195 0.198 0.197Average 0.197 0.196 0.195 0.209 0.206 0.205

s] It is to be understood that excise taxes on edible oils are increasedto raise net additional real revenue equal to 1% of indirect taxrevenue at 1984-85 prices. The same interpretation applies to III.5 toIII.20.

lable III.5.: Relative Change in Consumer Price Indicesby 1981-82 and 1983-84 HES Group: Increasing Excise Tax on Sugar

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 -(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.142 0.119 0.119 0.196 0.052 0.261300- 399 0.144 0.113 0.114 0.235 0.137 0.152400- 499 0.110 0.110 0.108 0.108 0.097 0.090500- 749 0.116 0.112 0.106 0.095 0.087 0.087750- 999 0.117 0.114 0.107 0.079 0.079 0.0791000-1249 0.122 0.113 0.109 0.089 0.091 0.0881250-1499 0.130 0.112 0.108 0.084 0.082 0.0821500-1999 0.130 0.110 0.110 0.086 0.085 0.0842000-2499 0.121 0.113 0.114 0.086 0.082 0.0812500-2999 0.123 0.104 0.108 0.085 0.088 0.0873000-3999 0.116 0.103 0.106 0.089 0.077 0.0784000-4999 0.111 0.104 0.106 0.078 0.077 0.0765000-5999 0.118 0.111 0.109 0.079 0.069 0.0736000- 0.108 0.080 0.087 0.075 0.077 0.076Average 0.115 0.107 0.107 0.082 0.082 0.081

- 163 -

Table 11I.6: Relative Change in Consumer Price Indicesby 1981-82 and 1983-84 HES Group: Increasing Excise Tax

on other Food Products

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.409 0.369 0.369 0.693 0.465 0.440300- 399 0.490 0.388 0.388 0.470 0.533 0.529400- 499 0.415 0.377 0.373 0.568 0.525 0.483500- 749 0.418 0.410 0.390 0.493 0.453 0.454750- 999 0.450 0.413 0.395 0.440 0.422 0.427

1000-1249 0.456 0.429 0.413 0.455 0.450 0.4351250-1499 0.479 0.431 0.412 0.463 0.423 0.4231500-1999 0.458 0.424 0.416 0.470 0.446 0.4402000-2499 0.442 0.435 0.431 0.449 0.434 0.4292500-2999 0.446 0.429 0.426 0.443 0.444 0.4363000-3999 0.449 0.409 0.413 0.425 0.399 0.3984000-4999 0.427 0.415 0.413 0.401 0.391 0.3885000-5999 0.485 0.415 0.432 0.388 0.318 0.3436000- 0.459 0.338 0.370 0.347 0.351 0.348Average 0.422 0.391 0.387 0.408 0.413 0.407

TABLE III.7: Relative Change in Consumer Price Indicesby 1981-81 and 1983-84 HES Group: Increasing Excise Tax on Tobacco

MonthlyIncome ---- HES 1981-82- ---- HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.424 0.397 0.398 0.290 0.329 0.324300- 399 0.452 0.396 0.396 0.311 0.379 0.377400- 499 0.442 0.391 0.391 0.464 0.360 0.357500- 749 0.446 0.403 0.401 0.426 0.384 0.386750- 999 0.446 0.397 0.396 0.421 0.381 0.3851000-1249 0.456 0.402 0.404 0.454 0.386 0.3891250-1499 0.453 0.397 0.399 0.439 0.390 0.3941500-1999 0.448 0.397 0.403 0.437 0.387 0.3892000-2499 0.437 0.396 0.405 0.443 0.386 0.3902500-2999 0.454 0.397 0.411 0.450 0.387 0.3933000-3999 0.452 0.394 0.410 0.434 0.385 0.3904000-4999 0.535 0.388 0.443 0.508 0.382 0.4105000-5999 0.488 0.364 0.408 0.527 0.375 0.4086000- 0.505 0.387 0.454 0.518 0.399 0.425Average 0.444 0.390 0.397 0.456 0.385 0.392

- 164 -

IableL LLL.: Relative Change in Consumer Price Indicesby 1981-82 and 1983-84 HES Group: Increasing Excise Tax on Cotton Yarn

MonthlyIncome ---- HES 1981-82 --- ------ HES 1983-84 --(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.164 0.160 0.160 0.079 0.202 0.192300- 399 0.136 0.153 0.153 0.213 0.135 0.136400- 499 0.142 0.144 0.143 0.133 0.139 0.133500- 749 0.128 0.150 0.144 0.130 0.143 0.142750- 999 0.135 0.147 0.142 0.140 0.140 0.140

1000-1249 0.133 0.155 0.148 0.133 0.142 0.1391250-1499 0.140 0.152 0.145 0.143 0.133 0.1331500-1999 0.141 0.156 0.150 0.143 0.143 0.1422000-2499 0.144 0.160 0.154 0.151 0.148 0.1472500-2999 0.151 0.166 0.160 0.158 0.148 0.1483000-3999 0.144 0.166 0.154 0.156 0.157 0.1554000-4999 0.140 0.176 0.157 0.157 0.154 0.1545000-5999 0.147 0.176 0.153 0.157 0.152 0.1556000- 0.141 0.163 0.141 0.146 0.168 0.161Average 0.135 0.150 0.145 0.147 0.146 0.145

Table III.9: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Cloth

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.144 0.140 0.140 0.059 0.182 0.172300- 399 0.116 0.133 0.133 0.194 0.115 0.116400- 499 0.122 0.124 0.123 0.113 0.118 0.112500- 749 0.108 0.130 0.124 0.110 0.123 0.122750- 999 0.115 0.128 0.122 0.120 0.120 0.120

1000-1249 0.113 0.135 0.128 0.113 0.123 0.1191250-1499 0.120 0.132 0.125 0.123 0.113 0.1131500-1999 0.122 0.136 0.130 0.123 0.122 0.1212000-2499 0.123 0.140 0.134 0.130 0.128 0.1272500-2999 0.131 0.146 0.140 0.137 0.127 0.1273000-3999 0.124 0.146 0.134 0.135 0.136 0.1344000-4999 0.120 O155 0.137 0.136 0.133 0.1335000-5999 0.128 0.156 0.134 0.135 0.130 0.1336000- 0.122 0.142 0.121 0.126 0.147 0.140Average 0.116 0.130 0.125 0.127 0.125 0.124

- 165 -

Table III.10: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Jute Textiles

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 -0.933 -0.943 -0.943 -0.969 -0.906 -0.904300- 399 -0.925 -0.949 -0.949 -0.941 -0.914 -0.915400- 499 -0.957 -0.955 -0.957 -0.944 -0.969 -0.973500- 749 -0.944 -0.956 -0.961 -0.951 -0.948 -0.949750- 999 -0.955 -0.950 -0.959 -0.966 -0.953 -0.9541000-1249 -0.972 -0.967 -0.975 -0.968 -0.940 -0.9461250-1499 -0.968 -0.960 -0.970 -0.960 -0.981 -0.9801500-1999 -0.963 -0.977 -0.982 -0.988 -0.994 -0.9942000-2499 -0.990 -0.985 -0.989 -0.986 -0.988 -0.9882500-2999 -0.989 -0.989 -0.997 -1.013 -0.989 -0.9923000-3999 -0.980 -0.995 -0.994 -1.003 -1.009 -1.0074000-4999 -0.968 -1.021 -1.003 -1.019 -1.025 -1.023500G-5999 -0.984 -0.998 -0.954 -1.039 -1.063 -1.0476000- -0.912 -1.057 -1.016 -0.998 -1.014 -1.010Average -0.944 -0.973 -0.971 -0.988 -0.990 -0.990

|Table III.l1: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise

on Pharmaceutial and Chemical Products

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.177 0.176 0.176 0.138 0.164 0.161300- 399 0.182 0.172 0.172 0.178 0.157 0.157400- 499 0.178 0.168 0.169 0.156 0.171 0.168500- 749 0.171 0.171 0.169 0.158 0.163 0.163750- 999 0.174 0.170 0.168 0.164 0.159 0.1591000-1249 0.176 0.174 0.173 0.162 0.163 0.1621250-1499 0.176 0.172 0.171 0.159 0.164 0.1631500-1999 0.178 0.176 0.176 0.162 0.166 0.1652000-2499 0.181 0.178 0.178 0.161 0.165 0.1642500-2999 0.180 0.178 0.178 0.165 0.166 0.1653000-3999 0.180 0.186 0.183 0.163 0.172 0.1704000-4999 0.179 0.180 0.179 0.164 0.168 0.1665000-5999 0.179 0.185 0.175 0.165 0.180 0.1756000- 0.175 0.181 0.175 0.161 0.181 0.17bAverage 0.171 0.172 0.172 0.161 0.168 0.166

- 166 -

Table 111.12: Relative Change in Consumer Price Iuidicesby 1981-82 and 1982-83 HES Group: Increasing Excise

on Fertilizer and Pesticides Textiles

MonthlyIncome ---- HES 1981-82 -- - HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.137 0.179 0.178 0.151 0.140 0.136300- 399 0.143 0.206 0.206 0.118 0.155 0.154400- 499 0.147 0.190 0.189 0.130 0.193 0.181500- 749 0.190 0.192 0.186 0.159 0.186 0.185750- 999 0.168 0.187 0.184 0.174 0.173 0.1731000-1249 0.160 0.194 0.191 0.159 0.178 0.1721250-1499 0.146 0.194 0.188 0.191 0.174 0.1711500-1999 0.158 0.194 0.191 0.167 0.179 0.1762000-2499 0.148 0.187 0.178 0.168 0.193 0.1892500-2999 0.161 0.194 0.188 0.171 0.20;. 0.1953000-3999 0.148 0.205 0.184 0.147 0.183 0.1774000-4999 0.153 0.176 0.157 0.172 0.188 0.1765000-5999 0.127 0.166 0.140 0.145 0.182 0.1796000- 0.111 0.171 0.134 0.133 0.177 0.166Average 0.143 0.195 0.180 0.157 0.187 0.180

lable 13III: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Paper

MonthlyIncome ---- HES 1981-82 ------- ...... HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Riural Bangladesh

0- 299 0.109 0.102 0.103 0.069 0.101 0.099300- 399 0.108 0.099 0.100 0.088 0.105 0.104400- 499 0.119 0.096 0.097 0.099 0.108 0.106500- 749 0.099 0.095 0.095 0.102 0.099 0.099750- 999 0.099 0.094 0.094 0.099 0.099 0.0991000-1249 0.104 0.096 0.096 0.103 0.096 0.0971250-1499 0.103 0.094 0.095 0.102 0.098 0.0991500-1999 0.102 0.095 0.096 0.101 0.099 0.0992000-2499 0.100 0.096 0.097 0.104 0.100 0.1002500-2999 0.100 0.096 0.097 0.105 0.096 0.0973000-3999 0.099 0.096 0.096 0.101 0.099 0.0994000-4999 0.108 0.095 0.100 0.105 0.098 0.0995000-5999 0.099 0.096 0.094 0.106 0.100 0.1016000- 0.098 0.102 0.098 0.101 0.100 0.100Average 0.098 0.095 0.097 0.102 0.099 0.100

- 167 -

Table II"L1: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Cement

MonthlyIncome ---- HES 1981-82- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.028 0.028 0.028 0.026 0.030 0.029300- 399 0.027 0.027 0.028 0.034 0.028 0.028400- 499 0.031 0.029 0.029 0.032 0.028 0.033500- 749 0.031 0.028 0.030 0.030 0.029 0.029750- 999 0.031 0.028 0.030 0.033 0.030 0.0301000-1249 0.031 0.030 0.031 0.032 0.027 0.0301250-1499 0.032 0.028 0.030 0.032 0.030 0.0301500-1999 0.032 0.031 0.031 0.032 0.029 0.0302000-2499 0.033 0.030 0.031 0.032 0.030 0.0312500-2999 0.035 0.031 0.032 0.033 0.029 0.0313000-3999 0.035 0.029 0.033 0.033 0.029 0.031

* 4000-4999 0.035 0.030 0.033 0.034 0.030 0.0325000-5999 0.036 0.031 0.033 0.037 0.029 0.0326000- 0.032 0.035 0.039 0.036 0.031 0.032Average 0.033 0.029 0.031 0.033 0.029 0.030

Table III.15: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Metal Products

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.029 0.032 0.032 0.028 0.031 0.030300- 399 0.030 0.031 0.031 0.032 0.030 0.030400- 499 0.032 0.036 0.037 0.032 0.030 0.032500- 749 0.043 0.038 0.038 0.041 0.034 0.034750- 999 0.042 0.044 0.044 0.040 0.043 0.0421000-1249 *).039 0.038 0.038 0.046 0.050 0.0491250-1499 0.041 0.045 0.044 0.049 0.042 0.0431500-1999 0.046 0.040 0.040 0.042 0.039 0.0402000-2499 0.047 0.040 0.041 0.044 0.042 0.0432500-2999 0.045 0.038 0.039 0.037 0.042 0.0423000-3999 0.053 0.038 0.044 0.045 0.039 0.0404000-4999 0.057 0.035 0.046 0.046 0.040 0.0425000-5999 0.059 0.037 0.068 0.041 0.036 0.0386000- 0.081 0.039 0.056 0.066 0.044 0.050Average 0.066 0.043 0.048 0.053 0.042 0,044

- 168 -

Table III.16: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on

Electricity and Gas

MonthlyIncome ---- HES 1981-82 -- - HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.044 0.116 0.116 0.037 0.047 0.046300- 399 0.042 0.102 0.102 0.044 0.044 0.044400- 499 0.280 0.174 0.197 0.377 0.044 0.373500- 749 0.279 0.081 0.254 0.197 0.235 0.228750- 999 0.234 0.115 0.231 0.416 0.300 0.281

1000-1249 0.206 0.166 0.228 0.294 0.087 0.2641250-1499 0.191 0.093 0.214 0.230 0.188 0.2301500-1999 0.184 0.209 0.206 0.225 0.098 0.1922000-2499 0.152 0.132 0.186 0.186 0.126 0.2062500-2999 0.143 0.212 0.169 0.162 0.092 0.1723000-3999 0.150 0.071 0.175 0.160 0.076 0.1694000-4999 0.141 0.081 0.157 0.140 0.042 0.1595000-5999 0.126 0.140 0.144 0.119 0.041 0.1256000- 0.113 0.065 0.110 0.099 0.088 0.120Average 0.162 0.151 0.227 0.162 0.129 0.188

Table 111.17: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Petroleum Products

MonthlyIncome ---- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.206 0.199 0.199 0.347 0.200 0.198300- 399 0.201 0.194 0.194 0.223 0.195 0.195400- 499 0.259 0.207 0.213 0.256 0.197 0.261500- 749 0.255 0.190 0.227 0.227 0.233 0.232750- 999 0.246 0.194 0.220 0.269 0.242 0.2391000-1249 0.238 0.205 0.220 0.241 0.195 0.2311250-1499 0.238 0.189 0.217 0.223 0.216 0.2241500-1999 0.223 0.213 0.214 0.223 0.198 0.2172000-2499 0.203 0.197 0.207 0.214 0.201 0.2172500-2999 0.207 0.208 0.202 0.205 0.194 0.2103000-3999 0.198 0.181 0.202 0.203 0.190 0.2074000-4999 0.185 0.184 0.194 0.189 0.179 0.2005000-5999 0.174 0.190 0.178 0.193 0.175 0.1946000- 0.177 0.177 0.179 0.175 0.187 0.190Average 0.204 0.199 0.215 0.200 0.201 0.212

- 169 -

Table IIIk18: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Wood

and Otlher Industries

MonthlyIncome ---- HES 1981-82 ---- ----- HES 1983-84 ------(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.175 0.126 0.128 0.051 0.155 0.150300- 399 0.145 0.118 0.120 0.090 0.179 0.176400- 499 0.136 0.111 0.113 0.131 0.125 0.124500- 749 0.111 0.104 0.105 0.123 0.136 0.135750- 999 0.110 0.098 0.098 0.116 0.123 0.1231000-1249 0.111 0.101 0.101 0.114 0.121 0.1191250-1499 0.105 0.094 0.095 0.111 0.116 0.1151500-1999 0.101 0.092 0.093 0.108 0.113 0.1122000-2499 0.091 0.090 0.090 0.110 0.108 0.1082500-2999 0.092 0.090 0.090 0.101 0.103 0.1033000-3999 0.090 0.086 0.086 0.095 0.101 0.1004000-4999 0.109 0.082 0.089 0.087 0.094 0.0925000-5999 0.083 0.090 0.082 0.090 0.086 0.0886000- 0.081 0.091 0.081 0.078 0.089 0.087Average 0.092 0.095 0.095 0.095 0.108 0.106

Tablg III.19: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Transport

and Counmnication

MonthlyIncome --- HES 1981-82 ------- ------ HES 1983-84 ------(Taka) Urban Rural Bangladesh Uriban Rural Bangladesh

0- 299 0.095 0.104 0.104 0.095 0.087 0.089300- 399 0.095 0.119 0.119 0.084 0.113 0.113490- 499 0.133 0.108 0.109 0.143 0.109 0.114500- 749 0.131 0.110 0.113 0.114 0.107 0.108750- 999 0.135 0.112 0.117 0.125 0.108 0.1101000-1249 0.127 0.112 0.116 0.116 0.108 0.1111250-1499 0.127 0.113 0.118 0.115 0.108 0.1091500-1999 0.125 0.111 0.116 0.123 0.108 0.1112000-2499 0.118 0.115 0.120 0.120 0.114 0.1162500-2999 0.128 0.119 0.127 0.126 0.113 0.1163000-3999 0.131 0.111 0.124 0.127 0.110 0.1154000-4999 0.122 0.107 0.118 0.134 0.099 0.1135000-5999 0.119 0.133 0.122 0.132 0.094 0.1086000- 0.150 0.115 0.133 0.124 0.105 0.112Average 0.134 0.116 0.131 0.124 0.109 0.113

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lable IL.20: Relative Change in Consumer Price Indicesby 1981-82 and 1982-83 HES Group: Increasing Excise on Trade

and other Services

MonthlyIncome ---- HES 1981-82 -- --- HES 1983-84 --(Taka) Urban Rural Bangladesh Urban Rural Bangladesh

0- 299 0.117 0.133 0.133 0.125 0.120 0.120300- 399 0.109 0.130 0.130 0.128 0.117 0.117400- 499 0.122 0.133 0.132 0.110 0.128 0.129500- 749 0.127 0.129 0.128 0.120 0.1.4 0.126750- 999 0.121 0.129 0.127 0.130 0.132 0.1311000-1249 0.128 0.130 0.128 0.130 0.128 0.1281250-1499 0.119 0.127 0.125 0.126 0.149 0.1461500-1999 0.120 0.134 0.130 0.133 0.150 0.1482000-2499 0.143 0.144 0.139 0.135 0.141 0.1392500-2999 0.120 0.140 0.134 0.146 0.139 0.1413000-3999 0.123 0.146 0.136 0.141 0.156 0.1524000-4999 0.125 0.167 0.152 0.151 0.169 0.1625000-5999 0.132 0.147 0.134 0.152 0.221 0.1926000- 0.122 0.158 0.147 0.153 0.175 0.168Average 0.121 0.133 0.131 0.142 0.151 0.149