The proposed budget for the next fiscal year will not increase confidence in business expansion for investors, said Mohammad Zaved Akhtar, president of the Foreign Investors' Chamber of Commerce and Industry (Ficci), an apex body of foreign investors in the country.
According to FY26 proposed budget projections, GDP growth is expected to rise by 157 basis points from FY25, while inflation is forecasted to fall sharply from double digits to 8% by June 2025.
While this presents a positive macroeconomic outlook, Ficci warned that higher minimum taxes and increased burdens on corporations and individuals could undercut this recovery trajectory.
At a press meet on budget reaction titled “National Budget 2025-26” on Wednesday, the Ficci president questioned: “There is no directive to increase the tax net in the budget. The government has said that this is not a budget for growth. Who would come to invest in this environment?”
He stated that the government’s commitment in the national budget 2025-26 towards equitable economic transformation and fiscal consolidation.
With a proposed budget size of Tk. 7,90,000 crore (12.7% of GDP), the government has targeted 6.5% GDP growth and a projected decline in inflation to 8%, a significant drop of 321 basis points.
Ficci views the budget's reform direction as positive; however, the implementation of certain tax measures may create unintended burdens on industries and individuals.
Individual, corporate tax
Ficci expressed concern over increased tax burdens on compliant individuals and businesses.
The Chamber noted that under the revised tax slabs, salaried individuals earning between Tk70,000 and Tk100,000 per month may face a 50%-60% higher tax burden, while those earning between Tk120,000 to Tk175,000 may experience an increase of 20%-30%.
This could significantly reduce disposable income for the fixed-income group, affecting consumption and quality of life.
Ficci also noted that the increased minimum tax from 0.6% to 1% for companies and from 0.25% to 1% for individuals would adversely impact SMEs, loss-making companies and inflation-stricken individuals.
For instance, a company earning no taxable income will still be liable to pay 1% tax on turnover, creating further strain on struggling entities.
Another point of concern is the imposition of a discriminatory 27.5% corporate tax rate for listed companies having less than 10% public shareholding.
Furthermore, the benefits of reduced rate tax for companies having cashless transactions have been withdrawn.
This, Ficci believes, goes against the goal of deepening capital markets and attracting quality listings.
Ficci reiterated the importance of inclusive tax policy reforms, emphasizing the need for a stable and predictable tax environment, along with a rationalized rate structure that fosters compliance and encourages investment.
VAT and reform
The chamber also highlighted the steep increase in VAT on online sales from 5% to 15%, which will likely hinder the growth of Bangladesh’s emerging digital commerce sector.
Similarly, the rise in customs duty on beverage concentrates from 10% to 15% could negatively impact consumer prices and industry margins.
Ficci reaffirmed its long-standing recommendation for a simplified and harmonized VAT system with a single rate and standard input credit mechanism.
The chamber appreciated the government’s continued push towards digital transformation through automation in tax administration and implementation of the National Single Window.
Ficci welcomed initiatives to modernize tax administration and separate tax policy from tax collection functions.
Ficci emphasized the need for realistic revenue targets and effective execution plans to avoid creating undue burdens on compliant taxpayers.
Former president of Ficci Naser Ezaz Bijoy and CEO of Standard Chartered Bangladesh said: “The revenue growth target has been set at 9%. To achieve this, revenue collection will have to increase by about 39%. But how that will be done has not been said.”
“Increasing the tax rate does not result in more tax collection, but rather, reducing the tax rate increases revenue collection,” he commented.
Rupali Haque Chowdhury, another former president of Ficci, said that small changes are shaking the industry.
“The main task of the NBR should have been to bring the business institutions that are not paying taxes into the tax net,” said Rupali, who is also president of Bangladesh Association of Publicly Listed Companies (BAPLC) and managing director of Berger Paints Bangladesh Limited.