A second-car carbon tax in the offing

The government is mulling to enact a carbon tax for the second car for first time in Bangladesh starting in the upcoming fiscal year 2023-2024.

At a recent meeting led by Finance Minister AHM Mustafa Kamal, the recommendations in this regard were taken into account.

The move is likely to be implemented in an effort to reduce carbon emissions, ease traffic jam in the cities and encourage the use of public transportation, said the minister.

Now, the issue will be discussed with Prime Minister Sheikh Hasina on May 14 for her approval.

Sources at the finance ministry said taxpayers who own several vehicles will be charged an additional fee when registering and renewing a second vehicle that might vary from Tk25,000 to Tk2,000,000.

When there are multiple vehicles with the same engine capacity, the higher capacity vehicle will pay the higher carbon tax rate, they said.

The government increased the additional motor vehicle tax for the current fiscal year. For instance, the additional import tax on vehicles with engines between 2001 and 3000 cc was increased from 200% to 250%, and the tax on vehicles with engines between 3001 cc and 4000 cc was increased from 350% to 500%.

The higher AIT price for vehicles with engines bigger than 3500 CC now costs Tk2,00,000, up from Tk1,50,000 when registering or renewing a vehicle.

In addition, if the owner owns two or more motor vehicles, the income tax law stipulates that the tax rate is 50% higher for each additional vehicle.

As of June 30, 2022, a total of 52,92,440 vehicles, including 3, 91,491 cars, are registered with the BRTA to ply on the country's roads.

Many countries already make some sort of distinction in their taxes on the acquisition or use of motor vehicles based on criteria relating to emissions.

In some countries, the tax rates are also determined by the fuel efficiency of the individual cars, which is closely tied to their emissions.

However, experts and economists opined that environmental considerations should take precedence over income generation.