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  Items with minimal inflation weight see VAT hikes

• Govt initiated the move to bridge the revenue gap
• No impact on essential services like education, health, and IT
  

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TDS Desk

The increase in value-added tax (VAT) on 43 goods and services will not significantly impact overall inflation, Finance Adviser Salehuddin Ahmed assured the public on Thursday (January 02).

Briefing media after a meeting of the Cabinet Committee on Government Procurement, he said the VAT increase will not lead to substantial price hikes for consumers or negatively affect the lives of ordinary people.

The advisory council approved the Amendment of Value Added Tax and Supplementary Duty Act yesterday (1 January), resulting in a VAT increase on 43 goods and services, including the fresh imposition of VAT on some items.

Responding to reporters’ query regarding the impact of the VAT increase, Salehuddin said, “Essential commodities like rice and pulses — key drivers of inflation — will not see increased duties, as their duties have been reduced to zero, offering relief to consumers.”

He further said, “The items whose prices are being increased have little importance in driving inflation.”

Regarding the VAT increase on restaurants, the adviser clarified that it only applies to three-star restaurants with an annual turnover exceeding Tk50 lakh.

He also downplayed the impact of the VAT increase on airfares, stating that the additional Tk200 raise is a marginal amount for frequent domestic travellers.

The finance adviser further stated that Bangladesh’s tax rates were comparatively low compared to other countries like Nepal and Bhutan. He emphasised the government’s commitment to maintaining near-zero tax rates on essential goods.

Addressing concerns about the timing of this decision, he explained that it was necessary to address the revenue gap created by significant government concessions.

He also clarified that this decision was not made at the behest of the International Monetary Fund.

Regarding potential impacts on ordinary people, Salehuddin reiterated that there will be no negative impact on essential services like education, health, and IT, which will continue to receive increased allocations.

He stressed the importance of revenue generation to avoid excessive deficit financing.

The adviser acknowledged that the tax and customs review is still ongoing but declined to comment on potential tax increases in those areas.

Addressing the economic outlook for the new year, Salehuddin said, “The economy has become quite strong, but stability is now required.”

He acknowledged improvements in the banking sector, with the Bangladesh Bank supporting weaker banks to restore discipline.