While the usual demands were in discussion the last few months, most pre-budget expectations from think tanks and trade bodies expected initiatives to stabilize the economy, especially after the fall of the Awami League government in August last year.
Most of their demands centered around raising the tax-free income limit, reducing corporate tax, capping the highest tax rate, higher tax relief, and more.
The interim government is set to unveil a Tk790,000 crore national budget for the FY26 on Monday, a defining moment for Bangladesh as it navigates mounting economic pressures and charts a course for stability and growth.
Restore stability
Restoring macroeconomic stability should be the top priority for policymakers amid a challenging environment for the interim government, the Centre for Policy Dialogue (CPD) wrote in its budget recommendations recently.
The CPD said that the interim government inherited an economy characterized by high inflation, subdued revenue collection, sluggish budget implementation, a liquidity crunch in the banking sector, and fast-depleting foreign exchange reserves.
Fahmida Khatun, executive director of the CPD, remarked: "The upcoming budget must prioritize the protection of vulnerable and disadvantaged groups and economic recovery.
"Short-term corrective actions are needed, along with medium-term reforms in resource mobilization, public finance management, and spending efficiency," she said.
The CPD also recommended raising the tax-free income threshold to Tk4 lakh in the next fiscal year's budget to ease the burden on taxpayers amid high inflation.
Currently, the tax-free income threshold stands at Tk3.50 lakh, which was set in the current fiscal year.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) also urged the government to raise the tax-free income limit for the common taxpayers to Tk4.5 lakh, from the existing Tk3.5 lakh.
The country's apex trade body also proposed raising the ceiling to Taka 500,000 for the female taxpayers and those above 65 years of age.
It is essential to raise the tax-free income ceiling for general people, elderly persons and women taking into consideration the inflation and gradually rising cost of living, said FBCCI Administrator Md Hafizur Rahman.
Rahman said the lower income people are forced to spend a major part of their income to buy daily essentials in this economic condition.
In this situation, the existing tax structure is putting an additional pressure on them, he added.
Lower highest tax rate
The Dhaka Chamber of Commerce and Industry (DCCI) has proposed lowering the highest tax rate from 30% to 25% in the upcoming budget, citing rising inflation.
DCCI President Taskeen Ahmed said: "Currently, the annual tax-free income limit for individuals is Tk3.5 lakh and the maximum tax rate is 30%. We are proposing to raise the tax-free income limit to Tk5 lakh and reduce the highest tax rate to 25%."
The DCCI also proposed a revised tax structure, suggesting that the next tax slab, after the tax-free income of Tk5 lakh, should have a 5% tax rate on the next Tk3 lakh income.
Currently, a 5% tax is imposed on income exceeding Tk1 lakh after the Tk3.5 lakh tax-free limit.
Taskeen said: "Currently, the standard VAT rate is 15%, but in various sectors, it has been reduced to 10%, 7.5%, and 5%. This multiple rate structure creates complexities for businesses, hampers tax administration efficiency, and often leads to disputes."
"Introducing a single 10% VAT rate and a 1% rate for informal businesses would simplify tax collection, reduce disputes, and ultimately increase revenue generation," the DCCI president also said.
The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) has demanded scrapping the conditions on cash transactions in corporate tax.
The trade organization alleged that traders are not able to avail corporate tax cut benefits due to the limits on cash transactions to get the benefits.
MCCI President Kamran Tanvirur Rahman said: "Although the corporate tax rate and effective tax rate have been reduced continuously in the past fiscal years, no one is able to enjoy this benefit due to the cash transaction conditions in the Finance Act, 2024.”
The MCCI president also emphasized the development of tax administration and the introduction of automated digitalization to reduce tax evasion and increase revenue.
The Foreign Investors' Chamber of Commerce and Industry (Ficci) emphasized the importance of collaboration with the NBR to create a more integrated tax system that streamlines revenue collection processes.
In an effort to attract more foreign investments, Ficci suggested optimizing the effective tax rate by withdrawing thresholds for inadmissibility, rationalizing Tax Deducted at Source (TDS), and gradually eliminating the minimum tax. These steps are aimed at creating a more competitive tax environment, ultimately fostering greater FDI inflow.
Take context into account
Professor Mahbub Ullah, president of the Bangladesh Economic Association, said: "The global economy is likely to witness turbulence, given what the Trump administration has started.”
"Therefore, this year's national budget must take into account not only domestic conditions but also international realities. We need to focus on tightening our belts."
Zaidi Sattar, chairman of the Policy Research Institute, said: "Local industries in Bangladesh are being given excessive protection, and the way supplementary duty has been increased in Bangladesh is non-compliant considering global standards, as flagged by the United States Trade Representative."
"These issues need to be rationalized," he added.
Others
Meanwhile, several industry associations have also submitted tax relief proposals to ease financial burdens on their respective sectors.
Bangladesh Paint Manufacturers Association has requested the removal of the 10% Supplementary Duty (SD) on paints and paint-related products, considering them essential goods.
Bangladesh Cold Storage Association has proposed a reduction in advance income tax (AIT) to 1% on potato purchases and the withdrawal of VAT and AIT on the procurement of cold storage equipment.
Bangladesh Agro Processors Association (Bapa) has sought exemption from tax deduction at source on the supply of agricultural products and has also proposed a uniform 5% tariff on the import of industrial raw materials.
The Bangladesh Textile Mills Association urged the rationalization of the value of imported fabrics and the removal of complications related to HS codes and valuation.
