Inflation is high, workers are dissatisfied in factories. Investment is stagnant, there is a crisis with gas and electricity. In this situation, when the country’s trade and commerce is in turmoil, the interim government has suddenly decided to increase taxes, duties and VAT on more than a hundred goods and services. Businessmen, politicians and economists have expressed concern over the government’s decision taken without consulting the stakeholders.
Those concerned say that the businessmen are unable to go against such an indiscriminate decision of the government as they are performing the duties of administrators in the country’s top trade organization. Most of the last leaders of the top trade organizations are now absconding. As a result, the opinions of the stakeholders are not being reflected in the decision-making.
On the night of January 9, two ordinances were issued to increase the value-added tax (VAT) or supplementary duty on more than a hundred goods and services. After that, in the face of criticism, the government reduced VAT and customs duties on several products and services, including restaurant services, mobile phones, internet, and medicines, and restored them to their previous rates. However, before making these decisions, there was no discussion with any party or advice from the business community. According to those concerned, such decisions were taken due to the weakness of the leadership in business organizations and the mentality of not taking any opinions from the stakeholders. Experts also called it a ‘strategic mistake’ by the government.
Those concerned said that the International Monetary Fund (IMF) has given Bangladesh a condition to increase the tax-GDP ratio by 0.2 percent to provide loans. In terms of taka, which is about 12 thousand crore taka. In compliance with the IMF’s conditions, the NBR has decided to increase taxes in the middle of the fiscal year.
However, several organizations, including the Restaurant Owners Association and the Bangladesh Agro Processors Association (BAPA), held press conferences and human chains in protest. Economists also opposed this decision.
“The VAT rate has been increased indiscriminately,” said Debapriya Bhattacharya, a fellow at the Center for Policy Dialogue (CPD) and convener of the Citizens’ Platform for SDG Implementation.
At a recent event, he also said that while direct attention needs to be paid to increasing revenue collection, the interim government is still paying indirect attention as before. This is worrying.
No discussion with businessmen
The Ministry of Commerce imposes taxes and exempts goods and services. Usually, the government increases tax rates and exempts a few goods throughout the year through the NBR notification. However, the budget for the fiscal year is presented in June every year. In that budget, it is decided to reduce or increase taxes on hundreds or more goods at once. The opinions of businessmen, politicians, economists and other stakeholders are taken throughout the month before the budget. However, this time the government has suddenly increased VAT, customs and VAT by issuing an ordinance. No opinions were taken in this case.
In this regard, Syed Zahurul Alam, Director (Operations) of Akij Food and Beverage Limited, told Jago News that this decision of the government is not business-friendly. There is considerable doubt whether this is part of some other plan or not. VAT and customs have been increased arbitrarily on the lowest level of products without any discussion with anyone. This is not people-friendly in any way, I am skeptical about whose interest this government is working for.
Imran Hossain, general secretary of the Bangladesh Restaurant Owners Association, said, “The people’s government is in power through a mass movement. But there was no discussion with anyone before taking such a decision. There is no reason to impose a tax burden on the people in the middle of the budget by talking about the IMF.”
Dr. Mahfuz Kabir, research director and economist at the Bangladesh Institute of International and Strategic Studies (BIS), told Jago News that it would have been better if the government had discussed with everyone. Then, it could have been found whether there was any other way to increase revenue. Since there was no discussion, such a decision cannot be called participatory. No one can find a person who took it well.
Lack of leadership in big trade bodies
The change in power has led to changes in the top positions of many business organizations. Many businessmen have been arrested in various cases and charges. Many have fled on charges of being involved in dictatorship. Administrators are appointed in the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and the Bangladesh Association of Software and Information Services (BASIS).
Sector stakeholders say that the lack of leadership in business organizations has created a distance between the government and the business community. The government is able to impose its decisions. Administrators do not understand the needs and language of the business community. They are representatives of the government. This is creating a crisis.
Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told Jago News that FBCCI, BGMEA and BKMEA are the three largest business organizations in Bangladesh. Most of the discussion and criticism about trade and commerce should come from here. Unfortunately, FBCCI and BGMEA are run by the rulers. There has been no response from either side regarding the increase in VAT and customs duties.
He said that no one has spoken on behalf of the business community. I am not getting any response from these organizations. The platforms to speak on behalf of the businessmen are becoming limited. Maybe I am speaking from BKMEA. On the other hand, the Metropolitan Chamber is occasionally speaking. Elections should be held as soon as possible where the administrator is. Representatives of the businessmen should come there. Then the words of the businessmen will reach the government.
Suddenly increasing VAT, taxes and duties is a strategic mistake of the government!
Bangladesh Institute of International and Strategic Studies (BIS) Research Director and economist Dr. Mahfuz Kabir told Jago News, this is a strategic mistake of the government. If the NBR had talked to everyone, it would have gotten good advice. The NBR had given the proposal to increase this tax to the government alone. The government does not have the money at the moment. The government has increased such VAT or duties by making a law. If there were discussions, various kinds of talks would have been held, proposals would have come.
Stating that there is a recession in trade and commerce, he said, investment is low. Now if VAT and taxes are increased, the prices of both goods and services will increase. As a result, the demand for goods will decrease. Due to these fears, there was no discussion with the businessmen. The businessmen might have obstructed the government.
Stating that it would not be possible to collect Tk 12,000 crore by increasing VAT or taxes, this economist said, revenue collection may increase somewhat.
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