The Foreign Investors鈥� Chambers of Commerce and Industry has expressed deep concern over the recent decision to increase VAT and supplementary duty on a range of products without prior consultation with key stakeholders.
The recent decision to hike VAT, SD and other taxes is likely to impact consumers while significantly raising the cost of doing business in the country, the chamber said in a press release issued on Monday.
This measure threatens financial stability and operational capacity of businesses that generate crucial tax revenue and drive economic growth.
The FICCI identified major concerns for businesses due to the increase in VAT rates to 15 per cent under non-recoverable conditions for procurement provider, repairs and maintenance, transport contractor and restaurant.
Furthermore, general consumers will face potential price hikes as industries aim to minimise losses, with retail purchase costs rising by 2.5 per cent due to an increase in the VAT rate from 5 per cent to 7.5 per cent.
Policies formulated without extensive study or stakeholder consultation can negatively impact investor confidence and deter future FDI inflows, said the release.
A lack of engagement with stakeholders before implementing significant policy changes may send negative signals to both domestic and international investors, raising concerns about the stability and predictability of Bangladesh鈥檚 business environment.
The FICCI urged the government to reconsider and re-evaluate the recent changes.
The chamber suggested that the government should promote strategies for industries to increase their sales revenue, which will automatically result in increased tax revenue.
The government should uphold the fundamental principle of VAT law. Under a single VAT rate, if 100 per cent input VAT is recoverable, even if the VAT rate is increased to 15 per cent, it will have a minimal impact, the release said.
The input credit mechanism needs to be simplified, akin to other countries, so that all SMEs and retailers can easily take input tax credit on their purchases without needing price declarations or maintaining complex VAT books. The government should focus on tracking all monetary transactions through simplified digitisation.
