Tariff rationalisation top 2025 priority
Staff Reporter
Centre for Policy Dialogue (CPD) Executive Director Dr Fahmida Khatun has urged the government to make tariff rationalisation its most pressing fiscal reform this year, warning that Bangladesh must reduce dependence on import duties as it prepares to graduate from least developed country (LDC) status in November.
Speaking at a high-level luncheon organised by the Foreign Investors’ Chamber of Commerce & Industry (FICCI) on “Conducive Fiscal Policy for a Better Investment Climate” at Renaissance Dhaka Gulshan Hotel on Sunday, Fahmida said existing trade privileges and flexibilities available to LDCs would no longer apply after graduation.
“One important point — my suggestion would be that tariff rationalisation should be the first and most important reform to be undertaken this year,” she said.
“We will increasingly have to depend on domestic resource mobilisation, but not at the cost of higher import duties and indirect tariffs.”
She also called for long-overdue VAT reform, describing the current system as overly complex despite years of discussion.
Citing India’s GST rationalisation as a model, she argued that simplifying VAT through fewer slabs and broader compliance could compensate for revenue losses from tariff cuts and ultimately boost collection.
Fahmida pointed to persistent shortfalls in National Board of Revenue (NBR) collection targets as a structural problem that has recurred for over a decade, attributing it partly to politically driven projections rather than realistic planning.
She also flagged widespread tax exemptions lacking sunset clauses, calling for time-bound incentives and greater transparency in tax expenditure data.
“Once exemptions are introduced, they tend to continue indefinitely. There should be clear time limits, as practised globally,” she said.
On budget methodology, she argued that Bangladesh’s practice of setting expenditure targets before securing revenue must be reversed, with the macro-fiscal framework guiding ambitions.
She also backed institutional reforms within the NBR, including automation, stronger human resource capacity, and separation of tax policy from administration.
Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, endorsed that position, calling the separation of tax policy and administration “absolutely mission-critical.”
He cautioned, however, that credibility matters more than ambition at this stage.
“If I were an investor today, I would be asking: is this credible, and will it be delivered? It may be more effective to start with less ambitious reforms, but ensure they are properly executed,” he said.
The session featured Dr M Masrur Reaz, Chairman of Policy Exchange Bangladesh, as keynote speaker, who cited high corporate tax rates, complex compliance processes, and policy unpredictability as key investor concerns.
The panel discussion, moderated by Shams Zaman of PwC, also included Chandan Sapkota of the Asian Development Bank and Abul Kasem Khan of BUILD.
Panellists broadly agreed that policy stability, a simplified tax system, and stronger regulatory coordination are essential to sustaining foreign investment in the years ahead.
