For the past two years, the cost of living in Bangladesh has been on a relentless upward trajectory, with expenditures across all sectors, both essential and non-essential, surging.
Ordinary citizens, already feeling the weight of this financial burden, had hoped for relief following the change in government after the student-led uprising.
However, these hopes were dashed as the new administration took a path of increased spending, heavily influenced by the International Monetary Fund (IMF).
VAT and supplementary duties have been raised from 3% to 15%, effectively increasing costs by an average of 12%.
For a family of four with a monthly income of Tk35,000, this translates to an increase in household expenses of between Tk8,00- 10,000.
Economists have warned that these measures will drive the poor further into poverty.
"With the VAT rate now set at 15% across goods and services, a typical low-income family will face an additional Tk250 in expenses for every Tk2,000 spent on necessities. This will only increase the hardship for ordinary people," said CPD Senior Fellow Mustafizur Rahman.
He further noted, "The government could have avoided this decision, opting to increase direct taxes rather than indirect ones, thus sparing the low-income population from further strain. But this was done under IMF pressure."
"Previously, I would pay Tk5 VAT on items like toothpaste, potato chips, biscuits, pickles, chutney, tissues, and bread for every Tk100 spent. Now, it's Tk15. How will I manage these additional costs?" asked one private sector employee.
Badiur Rahman, former chairman of the National Board of Revenue (NBR), questioned the government's approach, stating, "No government truly understands the suffering of the people. Even an interim government faces the same dilemma. How can one justify raising taxes halfway through a financial year, especially on goods essential for daily life?"
Costs have surged across various sectors.
For instance, expenses on food, mobile phone usage, internet services, medicine, and transportation have risen by an average of Tk10 for every Tk100 spent.
Supplementary duties have also increased the prices of school bags, books, pens, and pencils at the same rate.
Mobile talk-time and internet services have been subjected to an additional 10% supplementary duty.
Tanveer Mohammad, chief corporate affairs Officer at Grameenphone, spoke to the media about the mobile service tax hike.
"The government has imposed a 3% supplementary duty on mobile services, meaning customers now have to pay a total of 142.45 Taka, up from 133.25 Taka, including VAT, SD, and surcharges."
In the pharmaceutical sector, supplementary duties on raw materials have been increased from 2.4% to 3%, likely causing price hikes for many medicines.
Additionally, the cost of mosquito repellent coils has risen by Tk10 for every Tk100 pack.
Ghulam Rahman, president of the Consumer Association of Bangladesh, criticised the government's decision, stating, "Through an ordinance, the government, under IMF pressure, has raised taxes in nearly a hundred sectors, burdening the ordinary citizen. Apart from cigarettes, everything else is tied to daily life. This will drive up the cost of living and, in turn, exacerbate inflation. Prices have been rising since the pandemic, but where will it end?"
He added, "Many people have already sold their property or broken into their savings to survive. Some have even resorted to borrowing. How will these people manage the additional costs?"
The restaurant industry will also be affected, with Imran Hasan, general secretary of the Bangladesh Restaurant Owners Association, noting that people will now have to pay Tk10 more for every Tk100 spent at restaurants, further impacting low-income families.
According to the Bangladesh Bureau of Statistics (BBS), last year’s average inflation rate was 10.34%, up from 9.48% in 2023.
The high inflationary pressures have left people struggling, while income levels have not seen a corresponding increase.
The unemployment rate has also risen, with the quarterly Labour Force Survey showing 2.66 million unemployed in the first three months of the current fiscal year, up from 2.49 million during the same period last year, representing an increase of 170,000 jobless individuals.
