Proposed taxes weigh heavily on low income taxpayers: CPD
Staff Reporter :
The Centre for Policy Dialogue (CPD) has raised concerns that the proposed income tax changes in the national budget will disproportionately affect low- and middle-income earners over the next two fiscal years, while higher-income groups will experience relatively modest increases in tax liabilities.
Speaking at a post-budget dialogue held at Lakeshore Hotel in Dhaka on Sunday, CPD Executive Director Dr. Fahmida Khatun said the planned tax adjustments compromise the principle of equity in taxation.
“This structure contradicts the idea of an equitable tax burden,” she stated while presenting CPD’s analysis of the FY2025-26 budget.
According to CPD’s estimates, individuals earning Tk 6 lakh, Tk 10 lakh, and Tk 15 lakh annually will face tax increases of 12.5percent, 16.7 percent, and 16.7 percent, respectively, over the next two fiscal years (FY2026-27 and FY2027-28). In contrast, those earning Tk 30 lakh or more per year will see their tax burden rise by just 7.6 percent.
“From a distributional standpoint, the tax system is unbalanced,” said Dr. Fahmida Khatun. “One of the fundamental goals of the national budget is to reduce inequality, and this structure falls short in that regard.”
While the proposed increase in the annual tax-free income threshold to Tk 3.75 lakh from FY2026-27 has been welcomed, the CPD expressed concern that this adjustment is both minimal and delayed.The threshold has risen by only 7 percent from the previous Tk 3.5 lakh set in FY2023-24, whereas the cost of living is expected to increase by at least 27 percent-28 percent over the same period.
“The delay in implementing the new threshold, despite surging living costs and persistent inflation, raises serious questions,” she said, noting that inflation continues to hit low-income and fixed-income groups hardest.
However, the CPD praised some measures, including the proposed Tk 5.25 lakh tax-free threshold for “July warriors” and the minimum tax of Tk 1,000 for new taxpayers, calling them steps in the right direction.