As Bangladesh prepares its national budget for the upcoming fiscal year, economists and business leaders are urging the government to prioritize investment and business-friendly policies over increased taxation, warning that higher levies could worsen the country's ongoing economic crisis.
The country is currently navigating a perfect storm of challenges. High domestic inflation, a persistent dollar shortage, and geopolitical instability in the Middle East are putting pressure on Bangladesh's fragile macroeconomic foundation. Recent conflicts involving the United States, Israel, and Iran have disrupted global oil markets, creating uncertainty for fuel imports and remittance flows, key drivers of the national economy.
“The global situation, particularly the instability in the Strait of Hormuz, has directly impacted fuel costs,” said Md. Arif Hossain, Economic Analyst at The Daily Industry. “This is not just a cost for the transport sector-it trickles down to industrial production, increasing the cost of goods and threatening the competitiveness of our export sectors.” Fuel price hikes have already started to impact the Ready-Made Garments (RMG) sector, Bangladesh's largest export earner. Frequent power outages and rising production costs have eroded margins, leading many factories to scale back production.
“Most businessmen have already reduced their production capacity due to shrinking profits,” noted Shamim Rahman, News Chief of Kaler Kantho, in a recent analysis cited by The Daily Industry. “A budget that increases taxes instead of supporting investment could discourage further production and expansion.”
Inflation and Public Purchasing Power: Inflation in Bangladesh has remained stubbornly high, with overall prices rising over 9% and food inflation often surpassing 10%. The result has been a significant erosion of purchasing power for the general population. Experts warn that increasing indirect taxes, such as Value-Added Tax (VAT), would only exacerbate the situation, potentially triggering social unrest.
“Policymakers must be cautious about imposing new indirect taxes,” said Ayesha Akter, Senior Economist at The Daily Industry. “While the NBR faces a revenue shortfall, squeezing already burdened consumers is not the solution. Instead, the government should explore more strategic reforms to increase revenue without hurting the common people or the business sector.”
Banking Sector and High Interest Rates: The high-interest rate environment is another major concern. With borrowing rates between 14% and 16%-partly a result of IMF-mandated market-based reforms-investment has stagnated. Entrepreneurs are reluctant to take on new loans for expansion, as the combination of high production costs and high debt servicing obligations makes such ventures risky.
“Business owners are in survival mode,” said Tariq Alam, Finance Editor at The Daily Industry. “Any move to raise corporate or personal taxes further could stifle investment, leaving the economy even more vulnerable.”
Budget Recommendations from Experts: Experts suggest that the government should prioritize spending cuts over revenue hikes. Specifically, the Annual Development Programme (ADP) could see a suspension of less critical projects, while allocations for social safety nets, agricultural subsidies, and essential infrastructure should be maintained or increased.
“The key is to protect both the vulnerable and the productive sectors,” explained Dr. Fahim Chowdhury, Economic Policy Specialist at The Daily Industry. “Cutting unnecessary spending while ensuring liquidity and support for businesses can revive growth without overburdening taxpayers.”
Business leaders are also calling for structural reforms in taxation. Advance Tax (AT) and Advance Income Tax (AIT) systems, particularly on industrial raw materials, are currently trapping substantial working capital, creating cash flow crises for manufacturers.
“Reforming AT and AIT is essential,” said Rina Das, CEO of Bangladesh Exporters' Association, speaking to The Daily Industry. “A gradual reduction in these advance payments would free up liquidity, allowing businesses to invest in expansion and increase exports.”
A stable corporate tax framework is another key recommendation. Experts suggest a modest 2.5% reduction for both listed and non-listed companies to provide immediate relief to businesses struggling with high costs.
“Corporate taxes should be predictable and stable,” said Md. Sajidul Islam, Tax Consultant at The Daily Industry. “Sudden changes or the abrupt removal of tax holidays can disrupt investment plans. A phased approach is far better.”
Digitalization of tax collection and payments is also seen as a critical reform to reduce harassment, bureaucracy, and the cost of doing business. Experts argue that expanding the tax net to include millions of eligible citizens who currently remain outside the system is a more sustainable solution than burdening existing taxpayers.
“Instead of squeezing the existing taxpayers, the government should focus on bringing informal workers and small businesses into the formal tax system,” said Nusrat Jahan, Policy Analyst at The Daily Industry. “This will create a broader revenue base and strengthen economic resilience.”
Revenue Shortfall and Deficit Concerns: The current fiscal year has seen the National Board of Revenue (NBR) struggle to meet targets. From the first eight months, the NBR has reported a shortfall of nearly 71,000 crore taka, and total deficits may exceed 1 trillion taka. Analysts warn that attempting to bridge this gap through increased taxation could backfire, slowing investment and hampering recovery.
“With inflation at double digits and production costs rising, a tax-heavy budget would hurt both businesses and consumers,” noted Shamim Rahman, News Chief of Kaler Kantho. “A pro-growth approach focusing on investment, production incentives, and digitalization of revenue collection will serve the country better.”
Global Context and Export Sector Pressures: Geopolitical tensions in the Middle East are creating additional pressure on the economy. The Strait of Hormuz, a vital maritime route for oil imports, has become a flashpoint due to regional conflicts, pushing up fuel costs. Higher import bills, combined with dollar shortages, threaten the RMG sector and other major industries dependent on energy-intensive production.
“The global oil price uncertainty is a direct tax on our industries,” said Md. Arif Hossain of The Daily Industry. “Without government intervention to stabilize production costs and support exporters, Bangladesh risks losing its competitive edge in global markets.”
Conclusion: Budget for Growth, Not Burden: As Bangladesh drafts its next national budget, economists and business leaders agree on a clear message: the priority should be business-friendly policies and investment incentives, not tax hikes. Maintaining liquidity, stabilizing production costs, and digitalizing the tax system can stimulate growth, protect consumers, and increase revenues more effectively than imposing additional tax burdens.
“The government has a unique opportunity to craft a budget that balances fiscal responsibility with economic growth,” said Dr. Fahim Chowdhury of The Daily Industry. “Focusing on strategic spending cuts, tax reforms, and investment incentives can help Bangladesh weather the current storm and emerge stronger.”
Business representatives are watching closely, urging policymakers to ensure that the upcoming budget revitalizes industry, supports export competitiveness, and promotes sustainable growth, rather than placing additional burdens on taxpayers already grappling with high inflation and rising production costs.”The message from the private sector is clear,” concluded Rina Das of Bangladesh Exporters' Association. “If the government wants growth, the budget must favor business and investment-not taxes.”
