Integrate informal trading channels into formal tax system

Bangladeshi think-tank Policy Exchange Bangladesh in a national roundtable has proposed the integration of informal trading channels into the formal tax system.

It has advocated for promoting strategic policies, addressing non-compliance, and integrating informal trading channels into the formal tax system in the agro industries and the fast-moving consumer goods (FMCG) sector.

The observation came at a recently organised roundtable titled "Accelerating Private Sector Growth Through Effective Budget Planning: Priorities for Budget 2025-26".

Experts at the event also wanted a reduction in tax rates to encourage investment, driving long-term growth and increased revenue collection in the telecommunication sector, said a press release.

Moderated by Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, the roundtable also featured insights from economists; tax analysts; FMCG, tobacco, readymade garment (RMG), agriculture, and telecom companies; and representatives of the National Board of Revenue (NBR), Bangladesh Investment Development Authority (BIDA), and foreign chambers.

The discussion emphasised the budget's role in enhancing domestic resource mobilisation, realigning fiscal priorities, and ensuring efficient resource allocation for inclusive and sustainable growth.

Mohammad Belal Hossain Chowdhury, member (VAT Implementation and IT) at NBR, highlighted the board's reform efforts, saying, "We are working on massive automation to reduce harassment and improve compliance. Businesses must share actionable intelligence on illicit trade."

Farid Uddin, a member of the NBR Reform Committee and former member of the board, pointed to structural tax challenges. "80 per cent of our taxes are indirect, which is unsuitable for an aspiring economy. Radical reforms, not incremental changes, are needed, including addressing high tax deducted at source (TDS) and multiple VAT rates."

Md Ariful Hoque, director general of BIDA, said, "Revenue and investment are interconnected. We need automation, policy consistency, and bureaucratic mindset shifts. Land, energy, and tax policies must align."

Gintautas Dirgela, director of corporate affairs and communications at Japan Tobacco International Bangladesh, said, "We support the government's revenue mobilisation efforts. Sustainable tax policies, not abrupt hikes, prevent black market growth."

Mohammed Zahidullah, chief sustainability officer of DBL Group, said, "Energy shortages and carbon taxes threaten competitiveness.

Renewable energy incentives are crucial to retain orders."

Hossain Sadat, senior director of corporate affairs at Grameenphone, said, "A Tk 100 recharge incurs Tk 39 in taxes, hindering digital inclusion. VAT and supplementary duty (SD) rationalisation is essential."

Rejaul Karim, head of taxation at Nestle Bangladesh, urged cost reduction, saying, "Inflation has hurt demand. Simplifying VAT returns and lowering corporate taxes can revive consumption."

Dr Ashikur Rahman, principal economist at Policy Research Institute, warned of fiscal vulnerabilities: "For a decade, we have discussed low tax nets and over-reliance on indirect taxes. Bold reforms are overdue to prevent crowding out private investment."

Snehasish Barua, managing partner at SMAC, advocated fairness, saying, "Small and medium enterprises (SMEs) and multinationals should not face the same tax code. Separate SME tax regimes and lower TDS rates are needed."

TIM Nurul Kabir, executive director of Foreign Investors' Chamber of Commerce & Industry (FICCI), emphasised policy stability, saying, "Investors need predictability. Budgets must be based on impact assessments, not ad hoc targets, especially before graduation from the least developed country (LDC) status."

Concluding the session, Dr M Masrur Reaz said, "This dialogue is a starting point. We will compile proposals for NBR and BIDA to shape the FY2025-26 budget."

tonmoy.wardad@gmail.com