From razors to OTT, new taxes will bite you as govt chases higher revenue target

Infograph: TBS

While unveiling the proposed budget for the next fiscal year, the finance adviser did little to dispel concerns over rising living costs as several proposals in the Finance Ordinance are expected to further burden ordinary citizens, according to economists and consumer rights advocates.

To meet its commitments to the International Monetary Fund (IMF), the interim government aims to raise an additional Tk40,000 crore in the next fiscal year, primarily through higher taxes. From basic necessities like razor blades to luxury services like helicopter rides, tax hikes have been imposed wherever possible.

Experts warn that the added tax burden will ultimately fall on consumers, fuelling inflation rather than curbing it. They question the government's ability to bring down inflation to 5.5% under these circumstances.

SM Nazer Hossain, vice president of the Consumer Association of Bangladesh, told TBS, "No matter how the government collects it, if Tk40,000 crore in additional revenue is raised through increased taxes in the next fiscal year, the burden will inevitably fall on consumers."

He added, "When taxes are raised on products like plastic goods, home appliances, cotton, and yarn, the cost pressure will rise for all categories of consumers.

"As a result, even if the government intends to reduce inflation, these measures could end up pushing it higher instead."
Although the proposed budget proposes an increase in the tax-free income threshold, the change will only take effect a year later. This means lower- and middle-income earners, already struggling with high inflation, will see no immediate relief.

An advance income tax (AIT) of 2% has been imposed on 152 categories of imported goods. Additionally, the minimum tax on a company's turnover has been raised by nearly 67% – from 0.6% to 1% – which will take effect in the fiscal 2024-25.

Experts believe that increases in source tax across several sectors, including commercial transport, will ultimately shift the burden onto consumers.

The government, however, highlighted its efforts to keep prices stable for certain items, including agricultural and food products, as well as life-saving medicines.

A review of the new Finance Ordinance shows that prices of around 40 types of goods may increase in the coming year, while prices of 18 types of goods and services may decrease.

Due to higher VAT on several local industries, the prices of mobile phones, refrigerators, air conditioners, lifts, LPG cylinders, washing machines, electric ovens, blenders, juicers, electric kettles, irons, rice cookers, and pressure cookers are expected to rise. 

Prices of construction materials such as rods, steel products, cement, duplex boards, and cement sheets are also set to increase, along with plastic-made home appliances. VAT on online sales under the e-commerce sector has also been proposed to increase.

The readymade garment (RMG) sector may face higher production costs as the advance income tax (AIT) on cotton imports has been raised to 2%. 

Additionally, VAT on cotton yarn and man-made fibre yarn has nearly doubled per kilogram, which could lead to a rise in apparel prices. 
Given that Bangladesh imports nearly all of its cotton to serve its 170 million population, this change is expected to have a widespread impact.

Prices may also go up for items like razors, screws, nuts and bolts, cigarette paper, four-stroke three-wheelers, LED bulbs, self-copy paper, tiles, cement, imported ballpoint pens, toys, nutritional supplements for pregnant and breastfeeding women, beverages, water purifiers, televisions, computer accessories, cosmetics, and door locks.

On the other hand, some goods may see price reductions, including ice cream, LNG, handmade crafts, sanitary napkins, microbuses and minibuses, imported refined sugar, tyres, non-alcoholic drinks, animal feed, cricket bats, brake shoes, and brake pads.

Md Alamgir Hossain, former member of the NBR, told TBS, "Although the tax-free income threshold has been raised, it will not take effect until a year later. Prices are already high, and the budget may cause prices of several goods to increase further, pushing up the overall cost of living for ordinary people."

In the midst of all this gloom, one might want to relax at home by watching a movie on an OTT (Over-the-Top) platform, but even that has become costlier. The new budget has imposed a 10% supplementary duty on OTT services.

Redwan Roni, CEO of Chorki, said OTT could be a good source of foreign currency earnings, but imposing taxes will make progress difficult for this promising industry. 

"This will create a pressure on both the entertainment industry and the audience," he points out, citing their struggle to protect local business from stiff competition from global giants who earn huge from Bangladesh but pay no tax. 

Faisal Rahman, Head of Marketing and Business Development at Chorki, said, "If such a decision is finalized, it will definitely impact Chorki's subscription fees."