The Foreign Investors’ Chambers of Commerce and Industry (FICCI) Bangladesh has voiced serious concerns over the recent hike in value added tax and supplementary duty on a range of products without prior consultation with key stakeholders
FICCI represents 90 per cent of Bangladesh’s total FDI, covering high-revenue sectors such as tobacco, telecom, energy, and financial institutions, which collectively contribute approximately 30 per cent of the total internal revenue.
The recent decision to hike VAT, SD, and other taxes would impact consumers while significantly raising the cost of doing business in the country, the trade body said in a statement issued on Tuesday.
This measure threatened the financial stability and operational capacity of businesses that generated crucial tax revenue and drove economic growth, it said.
FICCI said that policies formulated without extensive study or stakeholder consultation could negatively impact investor confidence and deter future FDI inflows.
‘A lack of engagement with stakeholders before implementing significant policy changes may send negative signals to both domestic and international investors, raising concerns about the stability and predictability of Bangladesh’s business environment,’ the chamber said.
FICCI identified major concerns for businesses following the increase in VAT rates to 15 per cent under non-recoverable conditions, impacting key areas such as procurement providers (from 7.5 per cent to 15 per cent with 100 per cent input VAT non-recoverable), repairs and maintenance (from 10 per cent to 15 per cent with 100 per cent input VAT non-recoverable), transport contractors (from 10 per cent to 15 per cent with 20 per cent input VAT non-recoverable) and restaurants (from 5 per cent to 15 per cent with 100 per cent input VAT non-recoverable).
The chamber said that general consumers would face potential price hikes as industries aim to minimise losses, with retail purchase costs rising by 2.5 per cent due to an increase in the VAT rate from 5 per cent to 7.5 per cent.
The ultimate impact on the government will be a significant decrease in consumption, leading to a reduction in overall revenue. Hence, the strategy of increasing tax revenue through higher tax rates will likely be ineffective, the statement said.
‘FICCI has consistently collaborated with the government to develop rational and sustainable fiscal and regulatory policies that create a conducive business environment and align with long-term economic goals. The absence of consultation in this case marks a concerning departure from this collaborative approach,’ said the apex chamber, representing FDI in the country.
FICCI urged the government to reconsider recent tax changes, emphasising the need for transparent and constructive engagement with business communities to assess their impact.
It called for collaborative policymaking to balance economic growth with fiscal responsibility, ensuring Bangladesh remains attractive for investment and innovation.
FICCI proposed a forward-looking approach to address concerns over recent tax changes, recommending strategies to boost industrial sales revenue, which would naturally increase tax collections.
It urged the government to uphold the core principle of VAT law by ensuring 100 per cent input VAT recoverability under a unified VAT rate, even if set at 15 per cent, minimising the impact on businesses.
Simplifying the input credit mechanism and digitising monetary transaction tracking were also emphasised to ease compliance for SMEs and retailers.
FICCI reaffirmed its commitment to collaborating with the government to foster economic growth and a sustainable business environment.