Mindset shift to tax compliance key to FDI, sustainable growth: Experts

Expanding the tax net, shifting from indirect to direct taxes, increasing domestic consumption, and enhancing industry compliance through professionalism are crucial for attracting foreign direct investment (FDI) and achieving sustainable economic growth, experts said today (2 September).

They also stressed the need for greater transparency in revenue collection and rationalising tax exemptions.

The views came at a seminar titled "Macroeconomic Outlook and Impact of Finance Ordinance 2025," organised by MABS & J Partners, affiliated CA firm of Nexia in Bangladesh, at a city hotel.

The seminar brought together professionals, renowned economists, distinguished business leaders, and policymakers on a single platform to share insights on fiscal policy framing and its impact on the country's economic outlook. It featured in-depth discussions on the macroeconomic aspects of Bangladesh.

Metropolitan Chamber of Commerce and Industry (MCCI) President Kamran T Rahman attended as chief guest, while Md Shahadat Hossain, FCA and senior partner at MABS & J Partners, presented the keynote paper.

At the discussion, speakers welcomed government steps, including contractionary monetary policy to curb inflation, stricter classification of non-performing loans, alignment with international standards, and the formation of a task force for banking sector reform.

MCCI President Kamran said, "The Finance Ordinance 2025 is an integral part of our national budget. It comes at a critical juncture for Bangladesh's economy as we face inflationary stress, sluggish private investment, and the challenges of LDC graduation. 

"The government, given the circumstances, has sought to strike a delicate balance between fiscal prudence and growth."

He noted that Bangladesh's tax-GDP ratio stands at 8%, among the lowest globally, and called for its increase by widening the tax base. He also warned of the 25-40% surge in non-food inflation, driven largely by currency depreciation, which has worsened people's hardship.

Keynote speaker Shahadat Hossain highlighted that the country's foreign exchange reserves stood at $25.9 billion in mid-2025, with gross reserves exceeding $30 billion, supported by strong remittance inflows and slower imports. 

However, FDI fell to a five-year low in 2024, reflecting weaker investor confidence amid economic headwinds and policy uncertainty.

Private investment also fell to 22.48% of GDP in FY25, down from 23.96% the previous year, due to a dollar crisis, high energy prices, and rising lending rates.

"Our banking sector is under severe stress with record capital shortfalls, high non-performing loans, weak governance, regulatory inefficiencies and declining capital bases, particularly in the top 20 banks," Shahadat said while describing the economic outlook.

He highlighted the reforms the interim government introduced, aiming to restore policy credibility, streamline customs and VAT, strengthen reserves, and create new investment incentives.

He emphasised that reforms introduced through the Finance Ordinance 2025, including changes to the Income Tax Act 2023, could ease compliance and support investment. These include raising the tax-free income threshold to Tk3.75 lakh, shifting minimum tax assessment to taxpayer status instead of location, and offering deadline extensions in hardship cases.

Other measures include lower tax deducted at source for export agents (7.5% from 10%) and subcontractors of export-oriented garment industries (1%), which could encourage exports and strengthen reserves.

In the capital market, tax deduction at source for stock exchange members has been cut to 0.03% from 0.05%, while the withholding tax on securities transfers has risen to 15% from 10%.

Speakers noted that these measures could ease doing business, boost exports, strengthen reserves further, and support growth in both GDP and the capital market.