Economists and policymakers have called for timely and business-friendly reforms in the supplementary and excise duty structure to remove obstacles to investment and business expansion.
The complex high-rate tax system is not yielding the expected benefits in revenue collection—rather, it is creating additional pressure on small and medium entrepreneurs, the experts further remarked.
These were expressed at a workshop titled “Review of Revenue Performance in Bangladesh with Special Focus on Supplementary Duty (SD) and Excise” organized by the Policy Research Institute of Bangladesh (PRI) on Tuesday (February 3).
The workshop was chaired by Zaidi Sattar, chairman, PRI.
Syed Mushfequr Rahman, member, VAT Audit and Modernization, National Board of Revenue (NBR), attended as chief guest, while Md Mashiur Rahaman, first secretary, VAT Policy, NBR, joined as special guest.
Syed Mushfequr Rahman said: “We do not want to encourage excessively high tax rates, but revenue collection must also be ensured. Currently, there are nearly 17,000 benchmark rates under the domestic supplementary duty structure, which is not conducive to investment and trade expansion. Revenue performance from small and medium-income individuals and enterprises remains unsatisfactory, largely due to irrational rate structures. However, determining tax rates involves numerous challenges across personal, corporate, and other forms of taxation.”
Mashiur Rahman remarked: “Institutions such as the World Health Organization, the Ministry of Health, and the Department of Environment should be included in consultations on supplementary duty determination.”
He further stressed the importance of adopting a business-friendly tax policy to sustain and promote enterprises that contribute to economic growth.
Bazlul Haque Khondker, research director at PRI, highlighted that despite steady growth in per capita GDP, Bangladesh’s tax-to-GDP ratio has been declining, contrary to the experience of comparable countries.
“Around 17% of GDP currently comes from excise duties, which is outdated by modern standards. Corporate tax and VAT rates in Bangladesh are relatively high. Moreover, while most countries apply excise duties based on quantity, Bangladesh primarily imposes them on price,” Khondker noted.
He added that further in-depth analysis would be undertaken in the next phase of the research to recommend a more effective and contemporary excise duty structure.
Hafiz Choudhury, principal, The M Group, Inc, who joined virtually, questioned whether the current NBR framework is capable of ensuring fair and rational excise duty assessment.
In his concluding remarks, PRI chairman Zaidi Sattar said: “Conflicting demands in the 2012 tax law resulted in a complex and outdated tax policy introduced in 2019. The National Task Force on Tax Reform has recommended adopting a unified and simplified tax system to address these issues.”
He further stated that a dual-rate tax structure could be more suitable for Bangladesh’s economy, one lower rate for small and medium enterprises and a standard rate for others. Currently, a discriminatory excise duty system exists, where imported goods are taxed at higher rates than domestic products.
“While around 1,400 tariff lines are followed in general, excise duties cover nearly 1,700 tariff lines, with about 90% imposing lower rates on local products compared to imports. Such disparities contradict World Trade Organization principles and may pose challenges as Bangladesh transitions out of LDC status,” he added.