Amid widespread criticism and pressure from the business community, the government has partially rolled back increased VAT and supplementary duties on nine goods and services.
However, most of the previously announced hikes remain in place, leading to continued dissatisfaction among traders and industry leaders.
Despite repeated appeals, the National Board of Revenue (NBR) has largely dismissed demands for broader relief, prompting business associations to maintain their protests.
AK Azad, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), voiced strong concerns, stating: "Midway through the fiscal year, VAT and supplementary duties have been raised on nearly 100 goods and services. This has significantly escalated costs across multiple sectors. Businesses were already struggling due to the pandemic and the economic fallout from the Russia-Ukraine war. The added tax burden will force many to shut down."
Echoing these concerns, another former FBCCI president, Abdul Awal Mintoo, noted that business leaders have engaged with policymakers to advocate for reductions. "We have urged the government to reconsider these increases, but no tangible steps have been taken yet. We hope NBR will review the matter seriously."
The VAT hikes have sparked widespread protests, with various trade organisations holding press conferences and demonstrations.
Entrepreneurs in the automobile, hotel, and restaurant sectors took to the streets, while representatives of business groups staged a sit-in outside NBR headquarters.
In response, NBR Chairman Abdur Rahman Khan stated: "Last month, an ordinance was issued to raise VAT and supplementary duties in several sectors. Following consultations, adjustments have been made for certain industries. While additional requests have been received, immediate reductions are not feasible. These issues will be reviewed in the 2025-26 budget."
Over the past month, numerous business representatives have met with the NBR chairman and Finance Adviser Dr Salehuddin Ahmed, pressing for tax relief.
However, no firm assurances have been given regarding further reductions.
Ahsan Khan Chowdhury, chairman of Pran-RFL Group, warned that excessive taxation could stifle commerce.
"VAT, taxes, and duties must be structured to support, not burden, businesses. If enterprises cannot operate sustainably, how will they contribute to revenue collection? The government must ensure a balanced approach that fosters both economic growth and employment."
He further highlighted the adverse impact of increased VAT on processed agricultural goods.
"We source mangoes, tomatoes, pineapples, bananas, and guavas from marginal farmers to produce juices, sauces, and pickles. VAT on fruit pulp has been raised from 5% to 15%, escalating production costs. The real victims will be small farmers, and consumers will face higher prices. If demand falls, businesses will scale down operations, leading to job losses."
Several trade bodies have formally petitioned NBR, arguing that mid-year tax hikes have driven up operational costs.
Bangladesh Auto Biscuit and Bread Manufacturers’ Association President Shafiqul Rahman Bhuiyan questioned: "How can businesses survive if essential consumer goods are taxed so heavily? We have made repeated appeals, yet no concrete response has been given."
Bangladesh Agro-Processors’ Association (BAPA) has also expressed grave concerns, stating that the sector includes around 400 active members, with over 500 additional firms engaged in food processing.
The industry employs 500,000 workers, with many more involved indirectly.
The association warned that increased VAT would cripple the sector, leading to job losses and a decline in exports, which have surpassed $1 billion.
"Bangladesh risks losing ground to competitors such as India, Pakistan, Thailand, and Vietnam," the statement read.
BAPA President MA Hashem stressed that rising prices would deter consumers from purchasing processed food, ultimately harming farmers.
"Higher VAT will force companies to procure fewer raw materials, directly impacting agricultural producers."
A financial analysis submitted to NBR indicates that the revised VAT structure imposes an effective tax burden of 20-25% on certain industries.
With bank interest rates already at 15-16%, businesses face shrinking profit margins, potentially leading to widespread losses.
Former director general of the Bangladesh Institute of Development Studies (BIDS), Mustafa K Mujeri, criticised the mid-year tax adjustments.
"This is an ill-advised move that will put businesses in a difficult position. NBR and the business community should work collaboratively, not as adversaries."
Former adviser to the caretaker government, AB Mirza Azizul Islam, added: "Squeezing businesses to generate revenue is not a sustainable approach. Instead, the government should focus on creating an enabling environment that drives economic activity and naturally boosts tax collection."
Despite repeated appeals, there is little indication that further VAT reductions will be implemented before the next fiscal year’s budget, leaving businesses grappling with increased financial pressure.
