VAT, SD hike draw harsh criticism across sectors

The interim government's decision to increase value-added tax (VAT) and supplementary duty (SD) has drawn sharp criticism from business leaders, politicians and academics, with some labelling the move as "suicidal" and "self-destructive."  

At separate platforms today (11 January), they warned that the action would increase inflation, further erode the purchasing power of ordinary citizens and deepen the challenges faced by businesses.  

The criticism comes following the government's decision on Thursday to hike VAT and SD on around 100 products and services, including fruits, juices, beverages, tobacco products, restaurants, mobile talk time and internet.

Taskeen Ahmed, president of the Dhaka Chamber of Commerce and Industries, at a press briefing today, said the decision to increase VAT and SD is "suicidal" and will have a negative impact. 

He explained that the entire burden of the hike will fall on the people, which will hamper both national and international investments and trade. He suggested that the government should reduce its expenses instead of burdening businesses.  

"If the government reduces its expenses by 20%, at least Tk 50,000 crore will be saved, which could be used to cover budget expenses," he said. 

Selim Raihan, executive director of the South Asian Network on Economic Modelling, said in an opinion piece for The Business Standard today that the decisions to raise taxes and suspend TCB truck sales reveal "short-sightedness and inconsistency" in state policies.  

Raising VAT and SD on over a hundred products is particularly troubling for the public, the economist added.  

"It is truly alarming that the government continues to rely heavily on indirect taxes to boost revenue. Indirect taxes generally place the most strain on the general public, as they are directly tied to the price of goods or services, with the entire burden falling on consumers," he said.  

Anu Muhammad, former economics professor at Jahangirnagar University, said the government's only collective initiative over the past few months has been increasing VAT and SD.

"Beyond the move to increase VAT and duties, we have seen no cohesive initiatives from the government. This decision will raise the cost of living, increasing prices of goods and services," he added. 

Calls for tax hike withdrawal

Akhtar Hossain, general secretary of the National Citizens Committee, at a media briefing today demanded that the government immediately withdraw the ordinance raising VAT and SD.

He urged the interim government not to take actions under IMF conditions that would erode public trust in the government.  

"The government's effort to increase revenue is natural, but it should be done in a way that does not further burden people's living costs," he added.  

BNP Senior Joint Secretary Ruhul Kabir Rizvi has also criticised the tax hike. At a press conference today, he said the decision during a time of high inflation is "self-destructive".

"Due to rising inflation, people are already struggling, and the increased VAT on essential items such as medicines, LP gas, powdered milk, biscuits, pickles, ketchup, juice, tissue paper, fruits, soap, detergent powder, sweets and slippers will further burden lower and middle-income groups," he added.  

Rizvi also mentioned that following the political change brought about by the student-people's uprising, the business sector has suffered a major blow and is yet to recover from the losses.  

"In such a situation, the decision to increase VAT is self-destructive. This tax hike has been implemented at a time when the country is facing high inflation," he said.  

Rizvi noted that inflation is affecting not just lower-income and marginalised groups, but also the middle class. He warned that price hikes before the budget will further reduce the purchasing power of citizens and create new challenges for businesses.