Hoteliers threaten strike over proposed VAT hike

The Bangladesh Restaurant Owners Association has threatened a nationwide strike if the government does not withdraw its proposal for a hike in value-added tax (VAT) on hotels and restaurants.
It made the announcement during a press conference at a city hotel on Thursday, voicing concern over the impact of the new plan of the revenue board on both businesses and consumers.
Currently, patrons at regular and air-conditioned restaurants pay a 5.0-per cent VAT, which the National Board of Revenue (NBR) has proposed to raise to 7.5 per cent.
For non-AC hotels, the rate could double to 15 per cent from 7.5 per cent. Additionally, there is a 10-per cent supplementary duty (SD) on food.
Together, these taxes would amount to a total of 25 per cent, a figure Imran Hasan, secretary general of the association, called unrealistic and unaffordable for an average Bangladeshi consumer.
He sounded the alarm over the proposed VAT hike, particularly in the context of the persistently high inflation for more than two years.
Mr Hasan warned that the move would disproportionately burden the general public, potentially reducing restaurant business activity by 30-40 per cent.
The association accused the government of unfairly pressurising small businesses and consumers, while favouring larger corporations.
Mr Hasan argued that the proposed VAT hike would exacerbate inflation and harm employment in a sector already reeling from increased costs of services, rising food prices and higher wages for workers.
He also criticised the government for relying heavily on VAT as a primary revenue source, rather than broadening the tax base or addressing tax evasion.
According to the leader of the association, only 525,000 businesses in the country are VAT-registered and fewer than 350,000 pay VAT regularly.
He urged the NBR to focus on bringing unregistered businesses under the VAT net instead of increasing rates for compliant businesses.
Highlighting a historical context, Mr Hasan noted that VAT for the restaurant sector was once 15 per cent, but it was gradually reduced to 5.0 per cent after sustained lobbying.
He argued that this reduction led to a 19-per cent increase in VAT collection, proving that lower rates could generate higher compliance and revenue.
Restaurant owners have outlined a phased plan of action to oppose an escalation in VAT. Initially, they will form human chains countrywide as a symbolic protest.
If the proposal is not withdrawn, they plan to shut down all restaurants for a day. In the final stage, an indefinite strike will be enforced.
Mr Hasan criticised what he described as "unpopular policies" driven by bureaucratic decision-making, rather than political leadership.
He accused the interim government of implementing measures under the influence of the International Monetary Fund that would worsen poverty and rather benefit non-governmental organisations.
Khandaker Ruhul Amin, adviser of the association, and other leaders also called for the government to prioritise fair and inclusive tax policies.

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