Relying on an expansive indirect tax network, lower- and middle-income demographics continue to absorb the bulk of the domestic tax burden, face cost-push inflation, and find limited avenues for tax shelter alternatives compared to higher-income brackets.
A retail consumer or wage-earner paying fixed value-added taxes (VAT) on daily staples, mobile services, and consumer utilities cannot defer or balance out these micro-transactions.
Consequently, a vast portion of their liquid capital flows directly into state coffers.
In contrast, higher-income earners route substantial capital blocks into tax-exempt investment instruments, wealth accumulation structures, and financial growth vehicles, shielding their income from equivalent proportional taxation.
An analytical review of the proposed FY27 national budget indicates that the newly introduced tax bands will place the heaviest fiscal pressure on lower-middle and middle-income citizens.
During a budget dialogue titled "An Analysis of the Proposed Budget FY2026-27" organized by the Centre for Policy Dialogue (CPD), the research group highlighted significant discrepancies in individual tax adjustments.
According to CPD Executive Director Dr. Fahmida Khatun, individuals tracking middle-income brackets (earning between Tk6 lakh and Tk15 lakh annually) will face a tax burden spike of 12.5% to 17.0% under the proposed adjustments.
Conversely, individuals earning over Tk30 lakh annually will experience an increase of only 7.6%.
Economists note that this inverse structure places the greatest relative tightening precisely on those households with lower financial cushions.
Indirect taxes, particularly VAT, are inherently flat-rate and apply equally to consumers regardless of their individual financial standing.
This dynamic creates a regressive system where lower-income families pay a significantly higher percentage of their total earnings toward consumption taxes.
Consider a day laborer or lower-tier private employee earning Tk20,000 monthly.
To cover standard living costs, they must spend their entire income on basic provisions, paying a fixed VAT rate on nearly every transaction.
A high-net-worth individual earning several lakh Taka monthly spends only a fraction of their income on immediate consumption, dedicating the remainder to savings, wealth accumulation, and investments.
This dynamic creates a highly regressive environment where lower income levels correspond to a heavier net tax burden.
Compounded by ongoing inflationary pressures, these measures are actively reducing real purchasing power for average households.
High inflation and fixed costs
The proposed tax increases arrive at a time when food inflation and basic consumer goods prices remain elevated.
For lower-income demographics—who spend the majority of their income on food, rent, commuting costs, and medical care—the addition of new direct and indirect taxes reduces their remaining discretionary income.
Faced with these dual pressures, many families report drawing down their savings or taking on high-interest consumer debt to cover standard monthly expenses, increasing long-term vulnerability to poverty across vulnerable demographics.
The CPD also raised concerns regarding the lack of clear, actionable employment and wage-support frameworks within the budget to help balance the increased tax load.
Although macro-policy goals targeted creating 10 million new employment opportunities over an 18-month horizon, the current budget does not allocate proportional capital infrastructure toward the Ministry of Labor, the Ministry of Expatriates' Welfare, or the Ministry of Industries.
Rather than implementing progressive enforcement strategies on luxury goods, high-value asset accumulation, and untaxed capital pools, the revenue structure continues to rely heavily on consumption taxes as the fastest route to meeting revenue targets.
