Measures to leave 'catastrophic consequences' on the economy

The latest increase in VAT and taxes on different products as well as a move to double the gas price for industries would leave 'catastrophic consequences' on the economy that is currently going through critical challenges.

A leading trade body on Saturday warned of the adverse impact of the government move and said the measures would be suicidal for businesses, trade and investment as well as for the overall economy.

"The country is currently going through a critical moment and economic challenges," Taskeen Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI), told a press briefing at the trade body's office at Motijheel in the city.

The interim government has recently increased value-added tax (VAT) and other taxes on more than a hundred products and on few industries as well as proposed to raise gas prices to the level of imported LNG prices for the new industries and expanded units of existing industries.

Mr Ahmed said the economy is facing challenges mainly due to limited foreign exchange reserves, rising import costs, high energy cost, high rate of inflation, high interest rates, and poor access to credit.

Highlighting the contemporary economic situation of the country, he revealed the Dhaka chamber's priorities this year to confront the challenges.

He said the private sector is also facing many challenges emerging due to the global geopolitical instability and its impact on the international and local economy, and the deteriorating law and order situation at home.

The DCCI will focus more this year on reducing interest rates on loans, controlling inflation and keeping the foreign exchange rate stable, said its president.

Responding to a query, he said the low-cost financing needed to be expedited for the CMSMEs - the largest sector that creates more employment than any other sectors in the country.

Regarding reform initiatives taken by the interim government, Mr Ahmed expected the reforms would soon be completed as per the set target.

However, he pointed out that completing the 100 economic zones project by the year 2030 with all facilities is not an easy task.

"If the government can ensure all required infrastructure and other facilities in only five economic zones, local and foreign investors will be more optimistic and there is a possibility that investment activities would get a pace," he said.

Regarding continuation of the policy, he said entrepreneurs are encouraged to invest subject to obtaining a long-term supportive tax structure.

The sudden decision to increase tax or duties in the middle of a financial year will have a negative impact on the entrepreneurs, he said. "It's not desirable at all … it may not bring any good for the economy," he said, replying to a question.

He pointed out that Bangladesh was actually moving towards a right direction as far as the preparation for the LDC graduation is concerned, but has been facing unexpected setbacks due to the Covid pandemic, followed by Russia-Ukraine war, unrest in the Middle Eastern region, aftermath of local political unrest coupled with geo-political situation, instability in the financial market, and low forex reserves.

Now we need to assess how prepared we are in the current situation based on detailed discussions among the public, private and other stakeholders.

"If there is a need to defer the matter, the country may take some more time to graduate considering the overall economic situation," he added.

"If we graduate in 2026, the government will have to ensure comprehensive measures for the private sector to overcome challenges," he said.

The DCCI president said the tax-GDP ratio in Bangladesh is very low and the number of taxpayers is also not up to the expected level.

He recommended the government to take austerity measures for reducing the public expenditure and not to take unnecessary projects.

DCCI Senior Vice President Razeev H Chowdhury and Vice President Md. Salem Sulaiman and members of the board of directors were also present on the occasion.

[email protected]