Govt reverts VAT at restaurants to 5% amid protests
The government had announced the VAT will be increased to 15% for restaurants
Highlights
- Govt previously announced increasing VAT to 15%
- Restaurant owners and workers hold human chain in front of NBR
- NBR likely to issue notice reverting to 5% VAT within today
- VAT on various products and services being increased to fulfill the IMF's requirement of raising an additional Tk12,270 crore in revenue
Amid widespread protest against value added tax (VAT) increase in various sectors the government has decided to revert VAT at restaurants to 5%.
National Board of Revenue (NBR) member Mohammad Belal Hossain Chowdhury confirmed the matter saying a notice will be issued in this regard today (16 January).
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Previously, the government had announced the VAT would be increased to 15% for restaurants.
Restaurant owners and workers organised a human chain in front of the Revenue Building in Agargaon, Dhaka, today to protest the increase in VAT. Approximately 1,000 owners and workers participated in the demonstration, warning of stricter protests if the increased VAT is not withdrawn promptly.
Following the human chain, Imran Hasan, general secretary of the Bangladesh Restaurant Owners' Association, told The Business Standard, "Today, we had planned for 20,000 people to gather here. However, since NBR assured us yesterday that they would reconsider the decision, we have come with a smaller group of owner and worker representatives to convey our message."
He further stated, "With a 15% VAT, people will not dine in restaurants, which raises the risk of restaurants shutting down. This would result in millions of workers losing their jobs."
Abdullah Al Mamun, a 25-year-old employee of Bonolota Sweetmeat in Mirpur-11, said, "People are reluctant to buy products with 15% VAT. Every day, we face arguments over this. Our sales have dropped. If this continues, businesses will close, and we will lose our jobs. That is why we came to protest in front of NBR today."
On 14 January, the government implemented a regressive tax policy, despite previously advocating for progressive taxation, to fulfill the International Monetary Fund's (IMF) requirement of raising an additional Tk12,270 crore in revenue.
In a progressive tax system, individuals with higher incomes bear a larger tax burden, reducing income inequality by requiring wealthier individuals to contribute more. Conversely, regressive taxes impose a disproportionate burden on lower-income earners, as they pay a higher percentage of their income compared to the wealthy.
Instead of curbing tax evasion or increasing direct taxes, the government has broadly increased VAT and supplementary duties (SD) on nearly 100 products and services, which will heavily impact lower-income and general consumers.
According to the National Board of Revenue (NBR), 63% of the Tk4.80 lakh crore revenue target for the current fiscal year will be collected through indirect taxes such as Value Added Tax (VAT) and various import duties. Nearly 10 years ago, the share of indirect taxes was 65%.
