The 2X spicy fire Korean noodle challenge is a trend among the youth. Videos of the challenge posted on social media are as hot as the noodle. So is the price. With Nu 80 a packet, many who cannot afford the luxury have to do with watching videos.
A customs duty of 35 percent is imposed on the noodle. If it is brought down to 10, as proposed, retailers say it would cost around Nu 50. Noodles are unhealthy, especially for children. But the National Assembly’s decision to revise customs duty on goods imported from third countries, which the National Council also adopted yesterday, will have far reaching effects.
The revision covers about 500 items, including a long list of essentials that had been out of reach for many or made expensive because of the high duties imposed. From fruits and vegetables, cereals and coffee, spices and seafood, the duty has been slashed by 30 to 40 percent. There are many products that Bhutan cannot produce and this is looked into. The revision also increased duties on goods that could conflict with our own policies. For instance, duties of the import of wood or wood products are increased by 20 percent, from 10 to 30 percent.
The fear that it would kill local industries is only partially true. While some are protected by the fiscal incentives, the regional or bilateral agreements the government has signed take care of others.
If ever there is an impact on local industries, it would wake them up or force them to be competitive, both in price and quality of goods produced. Brand Bhutan is popular, how much we live up to it is a big question. The local market, as it is, is already flooded with imported goods as far as from South Korea. And we are not talking about essentials, but luxury items and junk food.
With food prices increasing by 11 percent amid the pandemic, any measure to bring down the cost of essentials should be welcomed. Controlling inflation is not beyond the government’s control, it can be done through fiscal policies. Customs duty is one. For instance, price of meat increased by around 30 percent, vegetables over 20 percent and fruits and dairy products by around 15 percent in January this year. Fruits and vegetables are seasonal and are beyond the affordability of many.
The advice is to eat fruits and vegetables for healthy living. A kilogram of imported apples in winter costs as high as Nu 250. This is a day’s wage for many. Most of the “Bangkok goods” that we happily promote are out of reach for a good section of our populace. There are choices in the market, but there are also restrictions. Some say the high duty on essentials is only for the poor for the rich can afford even if the duty is 100 percent like on alcohol and tobacco.
The concerns of shrinking revenue base or getting flooded with imported goods are genuine. But the benefits, if it trickles down to the people, outweighs the risk. How do we let consumers enjoy the benefit of the decision?
From experience we know how those in the import business cheat their way out of paying the high custom duties. If goods are not under invoiced, there are a lot of tricks up the sleeves to avoid the duties. In fact, revenue leakages are higher when duties are higher. Customs officials are convinced that the decision could in fact increase the revenue base besides facilitating better trade, improving tax compliance and that the consumer price index could go down as goods become cheaper.
Meanwhile, if we should be concerned by the decision, it should be about not making the country a tax haven. If imported goods from third countries are cheaper in Bhutan, many would want to import to export. This would dishonour our well-intended free trade agreements. And we have seen this happen in the past.