Two, too many: Govt introduces carbon tax for second car

If you're planning on buying a second car, then hold that thought.

In the first move of its kind, the government introduced a carbon tax with the aim of reducing carbon emissions, addressing city traffic congestion, and promoting the use of public transport.

In the latest budget for the Fiscal Year 2023-24, it was decided that taxpayers who own multiple cars will have to pay an additional tax ranging from Tk25,000 to Tk3.5 lakh during the registration and renewal of a second car.

The carbon tax rates will depend on the vehicle's engine capacity and tax will be fixed on the higher capacity vehicle in case of multiple ones. 

For every second and subsequent vehicles, an owner of cars up to 1,500cc will have to pay Tk25,000 in surcharge. The charge will double to Tk50,000 for the car that has an engine capacity of 1501cc to 2,000cc.

Besides, the owners of second cars with a capacity of 2,001cc to 2,500cc, will have to pay Tk75,000 for every car as the environmental protection surcharge.

The tax authority will impose Tk200,000 as surcharge for second or third cars over 3,000cc. 

The owners of second or third cars with 3,500cc and above engine capacity will face a surcharge of Tk 350,000.

Experts and economists believe that it would be a good initiative, but it should prioritise environmental issues rather than revenue generation, otherwise, it may become another form of wealth tax.

Speaking to The Business Standard earlier, Bareesh Hasan Chowdhury, research lawyer at the Bangladesh Environmental Lawyers Association (Bela), had said, "Carbon taxes are an interesting innovation but we have to remember this is both environmental policy and tax policy.

"We have to be careful to make sure that the tax net actually covers the target audience. The tax, if it aims to actually reduce carbon emissions and vehicle usage, needs to be designed to be fit for purpose." 

Mohammad A Razzaque, research director at the Policy Research Institute, said imposing carbon tax without prior notice or within a short notice will not be rational.

"If the government wanted to impose a carbon tax, it needed to develop a policy and consult people before that," he added.

But it seems their intention is more of revenue collection rather than curbing carbon emission, he said referring to the UK which has warned that it will impose carbon tax from diesel-driven cars after 2030.

In the last fiscal year, the government increased supplementary duty on motor vehicles while the supplementary duty on the import of 2001 CC to 3000 CC cars was increased to 250% from 200% and for cars of 3001 CC to 4000 CC, it was hiked to 500% from 350%.

The higher slab of AIT rate on cars with engine capacity above 3500 CC had to pay Tk2,00,000 during registration or renewal, which was Tk1,50,000 earlier.

Currently, many countries are applying some form of emission-related tax rate differentiation in their taxes on either the purchase or the use of motor vehicles.

There are also a number of countries where the tax rates depend on the fuel efficiency of the vehicles in question – which is closely linked to their emissions.

According to BRTA data, there are 3, 91,491 cars while a total of 52,92,440 vehicles are on the country's roads that have BRTA registration till 30 June 2022.