Business leaders decry 'tax terrorism,' plead for interest rate cuts

Highlights

• Businesses call for urgent reform of tax administration, reliable gas supply
• They also want improved law and order, faster regulatory processes
• Some urge government to delay LDC graduation by at least three years
• Solving transport woes and ensuring safe transit points also highlighted

Business leaders from across key industrial sectors have expressed their inability to withstand the current high interest rates and demanded relief from what they termed "tax terrorism" associated with advanced income tax (AIT) and tax deducted at source (TDS).

Speaking at a stakeholder dialogue hosted by the Bangladesh Investment Development Authority (Bida) in Dhaka today (4 December), more than 50 industrialists demanded urgent reform of tax administration, uninterrupted gas supply to factories, improved law and order, faster regulatory approvals and better transport infrastructure. Some also urged the government to delay LDC graduation by at least three years.

Energy Adviser Muhammad Fouzul Kabir Khan, Special Envoy on International Affairs to the Chief Adviser Lutfey Siddiqi, Bangladesh Bank Governor Ahsan H Mansur, National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan and Bida Executive Chairman Chowdhury Ashik Mahmud Bin Harun answered various questions from the businessmen at the event.

Apex Footwear Managing Director Syed Nasim Manzur described AIT and TDS as "tax terrorism," arguing that firms are forced to pay tax irrespective of profit or loss. "We have sometimes incurred losses but still paid higher taxes. We want relief from this," he said.

Manzur credited NBR for progress in automating bond management and resolving classification disputes, but said businesses now need similar relief from AIT and TDS.

Meghna Group Chairman Mustafa Kamal echoed concerns, stating that domestic manufacturers face competitive disadvantages. "There is no duty on finished chemical imports, but local producers must pay an additional 2% advance tax on production. It is pushing local industry backwards."

Tax practitioners note that TDS is often imposed on revenue rather than profit, and refunds are rarely processed. As a result, the effective tax rate can rise to 30-45%, significantly above the statutory 27.5%.

NBR Chairman Abdur Rahman Khan admitted systemic faults. "Globally, TDS is considered painless. But in Bangladesh, adjustments are not made and refunds remain extremely complex. Many people have tax deducted despite having no taxable income, yet we do not refund. This is a serious weakness in our system," he said.

High interest rates and financing costs also dominated concerns. Nasim Manzur said Bangladesh faces higher borrowing costs than competitors such as Vietnam and India, making businesses uncompetitive. Mustafa Kamal added that global borrowing has become more expensive due to Bangladesh's country rating, forcing firms to provide 20% guarantee deposits – double the previous rate.

Responding, Governor Mansur said interest rates can only fall if inflation is contained. "High inflation with low interest rates is wishful thinking. If inflation comes down to 5% within this fiscal year, we can begin reducing rates. But monetary discipline must be maintained for several more months," he said. The governor noted that prolonged negative real interest rates had contributed to macroeconomic imbalances.

Participants also stressed the need for improved security and transport systems. PRAN-RFL Director Uzma Chowdhury said foreign buyers are increasingly concerned about safety, transport disruption and airport inefficiencies.

Energy Adviser Fouzul Kabir said the country's infrastructure suffers from decades of politicised planning. "Roads were built without feasibility studies. A road was built in haor at a cost of Tk10,000 crore, but only taxis now ply there. We are now focusing on expanding the road network based on practical needs and ensuring discipline in transport," he said.

Businesses also complained of long delays in environmental clearance. BSRM's Saumitra Kumar Mutsuddi said his company waited 18 months for approval of an environmentally friendly project. Bida chairman Ashik Chowdhury admitted to facing similar delays himself despite heading a government agency.

On energy, East Coast Group Chairman Azam J Chowdhury argued that private participation in LNG had created capacity and could be replicated in oil supply and large energy projects. "Private companies can build infrastructure if there is a clear vision and policy support. Otherwise, the market will remain unstable," he said. 

Adviser Fouzul Kabir confirmed that the government is drafting a law to involve private companies in the energy sector, while avoiding the oversupply problems of the power sector.

Manufacturers also pressed for resuming the central bank's Export Development Fund (EDF). Governor Mansur acknowledged its importance but said expansion is blocked by IMF rules. "Once reserves exceed six months of import cover, I will not follow this restriction. Then I will add to EDF if necessary," he said.

Walton Hi-Tech Industries Managing Director Mahbub Alam warned that policy inconsistencies are discouraging long-term investment in electronics manufacturing. He cited tariff distortions that favour importers over producers and discriminatory public procurement rules that prioritise foreign brands. He also pointed to trade barriers under Safta that disadvantage Bangladeshi exporters in markets such as Sri Lanka.

Special Envoy Lutfey Siddiqi said Bangladesh's administrative structure remains outdated and unable to deliver policy outcomes swiftly. He noted that rising interest payments, demographic factors and the legacy of political interference in law enforcement have compounded fiscal and governance challenges.

Siddiqi argued that without data-driven governance, transparent reporting and performance evaluation, accountability would remain weak.