In Bangladesh, the government is planning to increase the VAT from 5% to 15% on items like restaurant meals, sweets, clothing, and tissue paper. This change is part of a plan to raise more money for the country, following advice from the International Monetary Fund (IMF) as part of a $4.7 billion loan.
Excise duties on air travel will also increase. The excise duty on domestic flights will go up from Tk 500 to Tk 700. For flights within South Asia (SAARC countries), the excise duty will double from Tk 500 to Tk 1,000. For flights to other countries in Asia, the tax will rise from Tk 2,000 to Tk 2,500. For international flights to Europe, the US, and other parts of the world, the excise duty will increase from Tk 3,000 to Tk 4,000.
Additionally, the supplementary duty (SD) on 10 imported items, including soap and raw tobacco, will be raised. This is part of the government’s broader efforts to increase revenue and simplify tax structures.
The government also plans to simplify VAT rates by reducing the number of items with lower VAT. This is aimed at improving tax collection and addressing the country’s low tax-to-GDP ratio. This comes after tax receipts dropped by 2.62% in the first few months of the 2024-25 fiscal year.
However, consumer groups are worried that these increases will make everyday items more expensive, putting more strain on people already struggling with high inflation. Some experts say the government should focus on collecting unpaid taxes rather than raising rates.
The NBR expects the changes to bring in an extra Tk 12,000 crore, which will help reduce the country’s reliance on borrowing and improve its financial stability. However, experts warn that the hikes could lead to higher inflation in the short term.
Source: The Daily Star
