'Reckless decision': Restaurant owners slam VAT hike, threaten strike
Imran Hasan, secretary general of the Restaurant Owners Association, criticised the plan to hike VAT rate amid the current high inflation rate
The Bangladesh Restaurant Owners Association has threatened to go on strike unless the government reconsiders its plan to hike Value Added Tax (VAT) on hotels and restaurant services.
The association came up with the warning at a press conference held at a hotel in the capital.
Meanwhile, last night, the National Board of Revenue (NBR) increased the VAT and supplementary duty on around 90 goods and services, including hotels and restaurants.
At the press conference, Imran Hasan, secretary general of the association, said the restaurant business has been struggling for over two years due to high inflation.
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"To ease the burden on consumers, we have been demanding a reduction of VAT from 5% to 3%. Instead, the government has increased it threefold, which will directly impact customers and lead to a decrease in dining out," he added.
He also criticised the government's decision to increase VAT without expanding the tax base or addressing tax evasion, calling the move a "reckless decision."
Last night, NBR hiked VAT for dining at regular and air-conditioned restaurants from 7.5% to 15%.
"Imposing taxes like the East India Company, under the pretext of IMF conditions, will not solve the issue"
Imran Hasan added that, in addition to the increased 15% VAT, a 10% supplementary duty has also been imposed, meaning consumers will have to pay a total of 25% in taxes.
"In the current circumstances, it will be impossible to collect this additional 25% tax from consumers," he said, noting that high inflation is already making the business environment difficult.
He mentioned that 70% of restaurants are still outside the VAT system and suggested that the government could address budget deficits by eliminating unnecessary projects rather than imposing additional tax burdens on the public.
"Imposing taxes like the East India Company, under the pretext of IMF conditions, will not solve the issue," he said.
He also said lowering VAT rates increases compliance, noting that VAT collection increased by 19% when the VAT rate was reduced from 15% to 5%.
"When VAT is low, people are more willing to pay. However, when VAT rates are high, consumers try to avoid paying it," he said.
He also pointed out that in most countries, direct taxes like income tax are the primary source of revenue, and VAT should not be the main revenue tool without expanding the tax base.
"Currently, around 5.25 lakh businesses are VAT-registered, but only about 3.50 lakh of them pay VAT regularly."
Nationwide shutdown planned
At the press conference, Imran Hasan said if the government does not withdraw the increased VAT, the association will form human chains to protect the interests of restaurant owners and their livelihoods.
At the same time, they will close all restaurants for one day as a symbolic protest, and if the government remains firm, they will shut down restaurants nationwide indefinitely.
