The interim government has raised VAT as an easy solution to narrow the revenue gap through indirect taxes instead of direct taxes, even though low- and mid-income people need protection from high inflation, says Dr. Debapriya Bhattacharya, head of the White Paper Committee.
“The economic growth is declining, and there is no sign of improvement in the latter half of the fiscal year. But we were astonished to see that the government inconsiderately increased VAT,” he said while addressing a symposium on Saturday.
The White Paper Committee, in collaboration with the Citizen’s Platform for SDGs, Bangladesh, organized the symposium titled ‘White Paper and Thereafter: Economic Management, Reforms, and National Budget’ at the Bangabandhu International Conference Centre (BICC).
“In order to collect taxes, the government has to gradually resort to direct taxes, but we did not see any plan for it. We have not even heard of any action being taken against tax dodgers, which worries us,” he stated.
Eminent economist Anu Muhammad alleged that the government raised taxes in line with an IMF prescription, overlooking mounting inflation and high lending rates, even though its loan amount is only two months’ worth of remittance inflows.
Dr. Debapriya criticized the interim government, saying that it lacks a clear economic manifesto, a situation reflected in its failure to revise the previous government’s budget. Furthermore, the structure of government spending, revenues, subsidies for the next budget, and allocations for the education and health sectors remain unclear.
Dr. Debapriya warned that the energy situation in the country may worsen during the upcoming Boro harvesting season.
He also cautioned that the pro-reform sentiment in Bangladesh may wane if the interim government does not accelerate its reform agenda.
“The people currently supporting reforms may step aside from the balanced reforms due to economic insecurity,” he said.
Addressing the event, Syed Nasim Manzur, managing director of Apex Footwear, said the confidence of both investors and consumers is currently very low and negative.
“I have never experienced such a difficult time in my 34-year business career,” he remarked.
“The cost of doing business has increased. VAT has gone up, and now there’s talk of raising fuel prices. Meanwhile, wages for workers have risen, but productivity has not,” he explained.
He added, “Lower the tax rates and put the right people in the right positions. Stop taxing only those who are already paying taxes. And please do not raise energy prices—we cannot afford it right now. Make our lives easier, please.”
However, Commerce Adviser Sk Bashir Uddin defended the interim government’s recent move to increase VAT, saying that indirect taxes are critically important for an unregulated market.
“Depending on direct taxes may be very good for a developed economy. For an unregulated market like ours, indirect taxes are critically important,” he said.
