Experts at roundtable urge 'regulatory impact assessments' before imposing new VAT, taxes
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Bangladeshi consumers are struggling with rising taxes amid higher inflation and weak revenue collection, raising concerns among economists and business leaders, said experts at a roundtable.
They argued that instead of relying on long-term structural reforms, policymakers are overusing indirect taxation, particularly VAT, which disproportionately affects lower- and middle-income groups.
The statements were made at the roundtable discussion titled "Additional tax burden on consumers: steps to overcome", organised by Jagonews24.com.
Khandaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD) said inflation was previously controlled artificially at around 6.0 per cent.
However, since March, inflation has risen due to International Monetary Fund (IMF) conditions.
"Food inflation drives overall inflation. The previous government attempted to stabilise prices through duty reductions, but rising import costs and dollar appreciation made those efforts ineffective," he said.
He also pointed to market mismanagement, citing the sudden disappearance of soybean oil from shelves despite refiners claiming a steady supply.
"Without a long-term vision, integrated supply chain management, and digitalised market data, controlling inflation will be difficult," he added.
Bangladesh faces a revenue shortfall of Tk 42,000 billion, while the IMF estimates it to be even higher at Tk 850 billion.
The government is targeting 17.5 per cent revenue growth in 2024, but a 45 per cent increase is needed to meet budgetary targets in the next five months, he said.
Dr Mustafa K Mujeri, former director general of BIDS, criticised the government's economic policies, calling them "wrong decisions at the wrong time."
He stressed that IMF-led strategies have historically failed in Bangladesh.
"Simply raising VAT is a short-term fix that burdens consumers without addressing core revenue challenges," he warned.
Dr M Masrur Riaz, Chairman and CEO of Policy Exchange Bangladesh, emphasised the urgent need for Regulatory Impact Assessments (RIA) before imposing taxes. He focused on three key concerns which include flawed approach and timing.
He said VAT hikes during economic uncertainty worsen financial pressure on consumers.
Speaking on regulatory issues, he said frequent tax policy changes, discretionary tax authorities, and unpredictable SROs discourage investment.
Mr Riaz said there is a lack of impact assessment.
"Tax policy decisions are made without evaluating their economic, environmental, or social effects", he said.
"The government must adopt a pro-business and pro-taxpayer approach. Discretionary tax powers must be reformed, and clear policy frameworks should be introduced," he further said.
Doulot Akter Mala, a journalist at the Financial Express and President of the Economic Reporters' Association (ERF), said that automation in the tax system remains ineffective.
"Manufacturers face rising taxes, while competitors in other countries benefit from better policies," she said.
Shafiqul Rahman Bhuiyan, President of the Bangladesh Auto Biscuit and Bread Manufacturers Association, said, "A roadside vendor or rickshaw puller relies on biscuits and tea. The sudden VAT increase puts small manufacturers at risk."
Meanwhile, non-AC restaurants, mobile internet services, and airline tickets are among 43 items affected by VAT hikes, reducing consumer demand.
Economists argued that expanding the tax base is a more sustainable approach than increasing indirect taxes.
"Currently, 67 per cent of individuals earning over Tk 10 million remain outside the tax net. Instead of overburdening existing taxpayers, the government should bring these individuals into the system," said economist Dr MM Akash.
SM Nazer Hossain, Vice President of the Consumers Association of Bangladesh (CAB), warned that traders often exploit VAT hikes by raising prices disproportionately, worsening inflation.
"Bangladesh’s economic stability depends on sound tax policies. If we overburden businesses and consumers, we risk stagnating growth and discouraging investment," said Ashraf Ahmed from the Dhaka Chamber of Commerce and Industry.
BKMEA president M Hatem, Pran RFL chairman Ahsan Khan Chowdhury, Bangladesh Agro-Processors' Association (BAPA) president MA Hashem, and ACI Foods' Faria Yasmin also spoke among others.