Bangla Press Desk: The interim government is all set to table the first national budget following the ouster of dictator Sheikh Hasina last year – with a razor sharp focus on trimming fascist-era extravagant spending and propping up state coffers all the while keeping the economy afloat.
In the process, the government would withdraw much of the tax exemptions and incentives enjoyed by businesses for decades. Businesses and some economists are concerned the austerity measures would invariably push the private sector to the “brink.”
There is little disagreement among all stakeholders that the economy has been buffeted by seemingly an endless series of back-to-back shocks starting with the Covid pandemic and the Ukraine war.
Now, there is a confluence of multiple crisis: the prolonging political uncertainty, persistent social instability in the wake of an abrupt government changeover, US tariff hikes and trade war, industrial gas price subsidy withdrawal, interest rate hikes, and elevated inflation pressures, among others.
The government aims to withdraw the tax exemptions to satisfy IMF bailout conditions, and rebuild fiscal capital buffers eroded during the Awami League fascist rule. However, policymakers should also keep in mind that the ethical and well-intended scheme could be unpragmatic and counterproductive.
The budget plans for the fiscal year 2025-26 would be presented live on Bangladesh TV on 2 June, and later, approved at the advisory council. It would come into effect on 1 July.
The budget would be worth Tk90,000 crore, a historic Tk7,000 crore short of current fiscal year’s budget. The government aims to bring down consumer inflation from around 9-10% to 6.5% within a year, achieve a 5.5% GDP growth and collect nearly 8% more taxes compared with the outgoing year’s figure.
He has also talked about reducing business incentives. He said, “Businesses must also pay reasonable taxes. It is not possible to provide incentives forever. In the upcoming fiscal year’s budget, incentives will be reduced.”
President of the Dhaka Chamber of Commerce and Industry (DCCI), Taskeen Ahmed, told Kaler Kantho that the private sector is currently under multifaceted pressure. In such a situation, if existing tax exemptions and subsidies in the industrial sector are suddenly withdrawn, many local industries — especially SMEs and newly established entrepreneurial ventures — will lose their competitiveness.
The DCCI president believes that some practical measures should be taken in the budget to support the development of local industries. According to him, reducing tariffs and VAT on raw materials to lower production costs, and continuing tax exemptions for new entrepreneurs and export-oriented industries, are necessary. Under the “Made in Bangladesh” policy, incentives should be ensured for local products, and a separate allocation should be made for the SME sector. In particular, he emphasized that the tax holiday for the electronics industry should be extended until 2032 to ensure its sustainable growth.
Following the advice of the International Monetary Fund (IMF), the National Board of Revenue (NBR) is planning to increase the tax burden on local industries of non-essential products such as refrigerators, air conditioners, and motorcycles. As a result, the prices of these products will naturally rise. Producers fear that this may lead to a decline in sales.
Speaking on condition of anonymity, a senior official of the National Board of Revenue (NBR) told Kaler Kantho, “To increase revenue collection, avoid keeping the same sector under preferential treatment for too long, promote the growth of other sectors, and gradually move away from a culture of exemptions, the government does not wish to extend tax benefits for the fridge and air conditioner producers any further.”
Recently, the Revenue Board has imposed a 5% VAT on mobile companies that produce at least two components locally, and a 7.5% VAT on mobile phones manufactured entirely from imported materials. NBR officials have stated that in both cases, this rate may increase by an additional 2.5%.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told Kaler Kantho that the industrial sector is already struggling with multiple problems, and the sudden withdrawal of tax exemptions could further reduce competitiveness.
Mohammad Hafizur Rahman, administrator of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said that given current global and domestic economic pressures, stakeholders have high expectations from the interim government’s upcoming budget. The focus should be on restoring business confidence through consistent policy support. He added that to boost investment and remain competitive, interest rates should be lowered and the budget should be investment- and business-friendly. Source: DS
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