Written by The Banking Post
A mid-year tax hike through ordinance has failed to bring in the expected revenues, instead triggering widespread protests and policy rollbacks that cut the government’s collection target almost by half.
The interim government had raised VAT, supplementary duties, and excise on around 100 products and services in January 2025, hoping to generate an additional Tk 120 billion to lift Bangladesh’s weak tax-to-GDP ratio. But the National Board of Revenue (NBR) managed to collect only about Tk 70.7 billion after reversing hikes on over 10 major items amid public backlash.
The measures—taken to meet International Monetary Fund (IMF) conditions tied to budget-support loans—included steep duty increases on cigarettes, air tickets, restaurants, telecom, internet, and pharmaceuticals. While some taxes stayed, several were rolled back within months following protests from businesses and consumers.
Cigarettes, long the government’s cash cow, missed their revenue target by Tk 20.18 billion despite sharp price and duty hikes across all four tiers. The NBR had aimed for Tk 500 billion from tobacco but collected Tk 394.48 billion, only slightly higher than Tk 374.3 billion in FY’24. Excise duty on domestic airline tickets also fell short, down Tk 230 million from the previous year despite higher rates.
Economists argue that abrupt hikes followed by rollbacks create fiscal unpredictability. “The government must earn policy credibility rather than fuel uncertainty with such stop-and-go measures,” said one policy analyst, stressing the need for systematic tax reforms instead of ad-hoc changes.
Officials admitted the additional revenue was insignificant compared to the economic disruptions it caused. Consumers, meanwhile, faced fears of a rising cost of living as VAT on essentials like gas, medicines, and internet services briefly went up before being reduced again.
The tax gambit, insiders say, ended up earning more ire than income—leaving questions over how Bangladesh will meet its fiscal reform commitments without undermining business confidence.
