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The latest figures from the Bangladesh Bureau of Statistics (BBS) point to a stark reality: inflation is coming back to bite, driven by fuel price hikes and supply chain disruptions caused by the conflict in the Middle East. The inflation rate rose to 9.04 per cent last month from 8.71 per cent in March. Inflation had only eased to single digits in January 2025 after a double-digit streak that lasted several years. Now, it is resurging again, eroding the purchasing power of ordinary people.
According to the latest Household Income and Expenditure Survey (HIES) of BBS, the average monthly household income in 2022 was Tk 32,422. Given the sharp and prolonged inflationary trend since then, even a moderate estimate would place average annual household expenditure between Tk 5 lakh and Tk 6 lakh. Yet, the tax-free income threshold for individuals is Tk 3.75 lakh annually, which exposes a growing disconnect between income realities and the existing tax structure.
Recognising the mounting pressure on households, the country's leading business chambers have proposed raising the tax-free income threshold for individual taxpayers from Tk 3.75 lakh to Tk 5 lakh in the upcoming fiscal year. The proposal was placed by the FBCCI, the Dhaka Chamber of Commerce and Industry, and the Bangladesh Chamber of Industries during pre-budget discussions with the NBR. Business leaders argued that raising tax-free income limit would provide much-needed relief to low and middle-income people. At the same time, it would encourage greater consumer spending and economic participation, which, in turn, could help expand the overall trade and business network.
Meanwhile, in another example of administrative overreach, the interim government fixed the tax rates for individual taxpayers for the 2026-27 and 2027-28 fiscal years. While it has raised the tax-free income threshold for individuals from Tk 3.5 lakh to Tk 3.75 lakh, it has also introduced significant changes in tax rates and slabs. The number of tax slabs has been reduced, while rates across several brackets have effectively been increased, resulting in a higher overall tax burden for many taxpayers.
The government, however, remains hamstrung by persistent revenue shortfalls. For the upcoming fiscal year, a budget of Tk 9.30 trillion has been planned for FY27, of which the National Board of Revenue has reportedly been assigned a revenue collection target of Tk 6.95 trillion. Achieving this target may prove to be a tall order, given the persistent shortfall in meeting revenue target.
Considering the dual need of increasing revenue collection and providing relief to individual taxpayers amid inflationary pressure, experts suggest that the tax liability of individual taxpayers should be determined on the basis of their ability to pay, rather than gross income. It is because a person may be "taxable" on paper, but in reality he or she may be struggling to meet even the basic expenses of their household. In Bangladesh's social structure, a family's economic foundation is typically based on the income of a single individual, who often supports dependent children, students, homemakers, elderly parents, adult dependents, and even unemployed siblings.
Many countries around the world now view taxation not merely through the lens of individual income, but by taking into account the actual financial responsibilities of a taxpayer. In the United States, income up to a certain threshold is tax-free, with additional allowances for married couples. In countries such as Japan and Singapore, tax relief is provided by considering dependents, children, and family obligations.
It is time Bangladesh adopted a more comprehensive, family-based taxation system that goes beyond the narrow focus on individual income. Under this framework, tax liability could be assessed based on the overall structure of the household, including the number of earning members and dependents. Families with multiple earners could be taxed more proportionately. This would not only improve fairness but also reduce undue pressure on single-income households that are currently overburdened under a uniform tax structure.