The Centre for Policy Dialogue (CPD) has raised concerns over what it describes as a growing disparity in Bangladesh’s proposed income tax structure for FY2026-27, warning that lower- and middle-income taxpayers will face a significantly higher increase in tax liabilities compared to high-income earners.
The observations were presented on Sunday during CPD’s budget dialogue held at a hotel in the capital, where economists, policymakers, business leaders and labour representatives discussed the implications of the proposed national budget.
Finance and Planning Minister Amir Khasru Mahmud Chowdhury attended the event as the chief guest, while CPD Executive Director Fahmida Khatun presented the keynote paper. The session was chaired by CPD Distinguished Fellow Dr Mustafizur Rahman.
Among those participating in the discussion were Planning State Minister Zonayed Saki, National Citizen Party (NCP) MP Akhter Hossen, Power and Participation Research Centre (PPRC) Executive Chairman Hossain Zillur Rahman, Research and Policy Integration for Development (RAPID) Chairman MA Razzaque, Bangladesh Chamber of Industries President Anwar-ul-Alam Chowdhury Parvez, BGMEA Senior Vice-President Inamul Haque Khan and Garments Workers Trade Union Centre President Montu Ghosh.
Presenting CPD’s analysis, Fahmida Khatun said the proposed tax measures would disproportionately affect taxpayers with annual taxable incomes ranging between Tk600,000 and Tk1.5 million.
According to CPD estimates, tax liabilities for this group could rise between 12.5% and 16.7% under the proposed tax regime. In contrast, individuals earning more than Tk3 million annually would experience an increase of only around 7.6%.
“This raises concerns regarding equity and fairness in taxation,” Fahmida Khatun said.
She noted that a progressive tax system should place a relatively greater burden on those with higher incomes.
However, CPD's assessment suggests that the proposed adjustments in tax slabs and rates may place a heavier relative burden on middle-income earners, many of whom are already struggling with persistent inflation and rising living costs.
The think tank argued that maintaining the tax-free income threshold despite continued inflation has effectively increased the real tax burden on salaried and fixed-income groups.
CPD also questioned whether the proposed budget contains adequate measures to support the government's ambitious commitment to create 10 million jobs within 18 months.
According to the organization, allocations for four key ministries directly linked to employment generation—Labour and Employment, Expatriates’ Welfare and Overseas Employment, Industries, and Commerce—have either remained stagnant or declined as a share of total public expenditure.
Fahmida Khatun said that while employment generation remains one of the government's key political commitments, the budget lacks a clear roadmap outlining how such a large number of jobs will be created within the stated time frame.
“Without a comprehensive national employment programme and necessary reforms, the target risks remaining a political aspiration rather than an achievable economic objective,” she said.
CPD also pointed to the prolonged delays in several employment-intensive projects, including the proposed Patuakhali Export Processing Zone (EPZ) and Jamdani Village initiative, arguing that stalled projects continue to limit opportunities for job creation and local economic development.
The organization emphasized the need for stronger support for small and medium enterprises (SMEs), skills development programs, labour-intensive industries, and youth employment initiatives.
The proposed budget aims to bring inflation down to 7.5% in FY2026-27. However, CPD expressed reservations regarding the feasibility of achieving that target.
According to data cited by the think tank, average inflation stood at 8.63% during the first eleven months of the outgoing fiscal year through May 2026.
Fahmida Khatun argued that inflationary pressures continue to be driven by food prices, energy costs, supply chain inefficiencies, and market distortions.
She said achieving the government's inflation target would require more than restrictive monetary policy.
“Ensuring adequate food and fuel supplies, strengthening market oversight, improving logistics, and maintaining prudent monetary management will be essential,” she noted.
CPD warned that if inflation remains elevated, the purchasing power of households—particularly lower-income families—could continue to erode despite projected economic growth.
While acknowledging that the budget reflects the government's intention to accelerate economic recovery, CPD described several macroeconomic assumptions as “overly optimistic.”
The proposed budget targets GDP growth of 6.5% in FY2026-27. However, CPD argued that achieving such growth may prove challenging amid global economic uncertainties, persistent domestic structural weaknesses, sluggish private investment, and ongoing vulnerabilities in the banking sector.
The think tank also highlighted concerns regarding revenue mobilization.
Bangladesh has repeatedly fallen short of revenue collection targets in recent years, raising questions about the government's ability to achieve the ambitious revenue goals outlined in the new budget.
CPD stressed that meaningful tax administration reforms, expansion of the tax net, reduction of tax evasion, and greater digitization of revenue collection systems will be critical for meeting fiscal targets.
Despite its concerns, CPD welcomed the increase in allocations for education, health, and other human development sectors.
The organization described the additional spending as a positive step toward strengthening human capital development, which remains essential for long-term economic growth and competitiveness.
However, Fahmida Khatun cautioned that budgetary allocations alone would not guarantee improved outcomes.
“The effectiveness of implementation remains a major concern,” she said, noting that many public sector projects continue to suffer from delays, underutilization of funds, and weak institutional capacity.
CPD emphasized that improving governance, transparency, accountability, and project implementation efficiency would be necessary to ensure that increased spending translates into better services and development outcomes.
Speakers at the dialogue broadly agreed that the success of the FY2026-27 budget will depend not only on expenditure plans but also on the government's ability to implement structural reforms.
Economists highlighted the need for reforms in revenue administration, banking sector governance, investment facilitation, labour market development, and public expenditure management.
They argued that without addressing these long-standing challenges, Bangladesh may struggle to achieve its targets for economic growth, employment generation, inflation control, and social equity.
The CPD concluded that while the budget contains several positive initiatives, greater attention is needed to ensure fairness in taxation, strengthen employment-focused spending, and improve the implementation capacity of public institutions.