The proposed budget for FY2026-27 includes a range of measures aimed at expanding the tax base without increasing tax rates, providing tax exemptions on essential goods, reducing healthcare costs, and encouraging the creative economy.
At the same time, concerns remain over increased compliance requirements for taxpayers and small businesses, reduced tax benefits on savings instruments, and a widening budget deficit financed largely through borrowing.
Finance Minister Amir Khasru Mahmud Chowdhury is set to place a Tk938,000 crore budget in parliament on Thursday, marking the first full budget of the BNP-led government.
While the budget seeks to support economic recovery, investment, employment generation, and social protection, economists have raised concerns about its heavy reliance on debt financing.
Focus on expanding the tax net
The government says the budget prioritizes broadening the tax base rather than raising tax rates, with several measures aimed at bringing individuals and businesses outside the formal tax system under greater scrutiny.
Under the proposed framework, a Tax Identification Number (TIN) and Proof of Return Submission (PRS) will be mandatory for opening bank accounts, obtaining loans, renewing trade licences, and accessing various financial services. Business Identification Numbers (BINs) will also become increasingly important for commercial activities.
National Board of Revenue (NBR) officials say the measures will help identify thousands of untaxed businesses and transactions. However, business leaders have warned that additional compliance requirements could create challenges for small and medium-sized enterprises.
Relief through tax exemptions
To ease pressure on consumers amid persistent inflation, the budget proposes tax relief on a wide range of essential commodities.
Source tax rates are set to be reduced on nearly 60 products, including rice, wheat, potatoes, fish, meat, poultry, onions, garlic, ginger, sugar, and edible oil.
VAT exemptions on various fertilizers, along with duty concessions on pesticides and insecticides, are also proposed to lower agricultural production costs and help stabilize food prices.
Healthcare sector gets major concessions
The budget includes several initiatives aimed at reducing healthcare expenses for patients.
Duty and VAT exemptions have been proposed on the import of cardiac stents, intraocular lenses, dialysis equipment, and raw materials used in pharmaceutical manufacturing.
Healthcare experts say the measures could lower the cost of cardiac stents by Tk15,000-20,000 and reduce expenses related to eye care, cancer treatment, and kidney dialysis.
Support for the digital and creative economy
The government has proposed VAT exemptions for freelancers, content creators, and parts of the digital services sector.
Startups are also set to receive formal legal recognition for the first time, potentially paving the way for future incentives and investment support.
In addition, tax concessions have been proposed for the music, film, and broader creative industries as part of efforts to expand the contribution of the creative economy to national growth.
Savings certificate holders may face higher tax burden
Despite broad-based tax relief elsewhere, the budget proposes changes that could increase the tax burden on savings certificate holders.
Currently, tax deducted at source on savings certificate earnings is treated as the final tax liability. Under the proposed system, that deduction would be considered advance tax, requiring investors to include the income in their annual tax returns and potentially pay additional taxes.
Economists say this change could significantly increase the effective tax burden on middle-income savers. The scope of investment-related tax rebates is also set to be narrowed.
Focus on luxury spending, not wealth tax
Although the government had pledged to increase tax contributions from higher-income groups, it has stopped short of introducing a wealth tax.
Instead, additional taxes and advance income tax have been proposed on luxury vehicles, personal firearms, helicopters, and gold ornaments.
Advance income tax on high-engine-capacity vehicles is set to increase substantially, while helicopter registration and fitness renewals could attract source taxes of up to Tk10 lakh.
Economists view these measures as indirect attempts to increase taxation on wealthier individuals, though they note that a direct wealth tax remains absent.
Concerns over borrowing
The proposed budget targets Tk695,000 crore in revenue against total expenditure of Tk938,000 crore, leaving a deficit of approximately Tk243,000 crore.
To finance the gap, the government plans to borrow Tk112,000 crore from the banking sector and Tk116,000 crore from foreign sources and other channels.
Economists warn that heavy government borrowing from banks could crowd out private-sector lending at a time when private-sector credit growth has already slowed to around 4.7%, signalling weak investment activity.
Implementation remains the key challenge
While the budget outlines ambitious goals for social protection, tax reform, and economic recovery, questions remain about the government's capacity to implement them effectively.
Economists say tax relief measures and welfare programmes may provide short-term support, but the success of the budget will ultimately depend on controlling inflation, increasing investment, creating jobs, and meeting revenue targets.
Without meaningful progress in those areas, they caution, many of the budget's ambitions could remain unrealized.
