With rising VAT, taxes, biscuit-bread packets may shrink to nothing: Entrepreneurs

Entrepreneurs have criticised value-added tax (VAT) and taxes on biscuits and bread, calling them staples for low-income people, and voiced concern over continuing shrinkflation. 

"How much smaller must we make biscuit and bread packets to ease this pressure? Will we have to keep shrinking their size until we are left with empty packets?" said Shafiqur Rahman Bhuiyan, president of the Bangladesh Auto Biscuits & Bread Manufacturers Association. 

He made these remarks at a roundtable discussion titled "Additional Tax Burden on Consumers: What to Do to Overcome It," organised by the online news portal Jagonews24.com at the Metropolitan Chamber of Commerce and Industry (MCCI) Conference Hall yesterday. 

The discussion was moderated by Jago News acting editor KM Ziaul Haque and featured insights from former BIDS director general Mustafa K Mujeri, economist MM Akash, PRAN-RFL Group Chairman and CEO Ahsan Khan Chowdhury, economist M Masrur Riaz, former NBR member Rezaul Hasan, Knitwear Industry Owners' Association President Mohammad Hatem, and former Dhaka chamber President Ashraf Ahmed. 

Shafiqur Rahman emphasised that biscuits and bread are essential staples for low-income people in the country. However, due to the increased VAT, manufacturers can no longer produce these items at affordable prices. 

"We have been protesting for a month to reduce VAT, and we are still fighting for it. We had hoped that the interim government would address our concerns, but that hope is fading. Food products should be exempt from VAT. In developed countries like England, essential food items are VAT-free," he said. 

Ahsan Khan said, "As businessmen, we want to contribute to increasing government revenue, but not by imposing VAT on essential food items." 

Khandaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), highlighted that 67% of individuals earning crores of taka annually remain outside the tax net. Despite a significant portion of high earners, the tax system fails to capture them, making it impossible to improve the tax-to-GDP ratio with such a narrow and ineffective tax base. 

He criticised the government's recent decision to increase customs duties and VAT on over a hundred goods and services, stating that it has damaged its reputation. 

"In the first half of FY25, there is already a Tk85,000 crore shortfall from the revenue collection target set by the IMF. Under pressure to boost revenue, the government is relying on indirect taxes instead of expanding the tax net," he said. 

Moazzem also lamented the longstanding inefficiency in tax administration, noting that "despite 20 to 25 years of efforts to automate the system, little progress has been made. It appears there is no real interest in reform – perhaps due to personal interests. Without eliminating such inconsistencies and enforcing proper regulations, tax collection will not improve." 

He called for long-term reforms in the National Board of Revenue (NBR) and the broader revenue sector, hoping that the interim government would initiate these changes. If implemented, he believes the next political government could carry them forward. Additionally, he advocated for the introduction of a wealth tax. 

Mustafa K Mujeri said the interim government had made the wrong decision at the wrong time, which would have adverse effects in the future. Moreover, these decisions are being taken without a proper plan. 

He further said tightening monetary policy has failed to curb inflation, yet businesses are bearing the brunt of its impact.