Economists and tax experts have warned that Bangladesh’s growing dependence on indirect taxes is deepening inequality, driving up living costs, and weakening economic competitiveness, while shielding wealthier groups from a fair tax burden.

They said the country’s tax structure has become excessively reliant on VAT, source taxes, and other indirect levies that hit ordinary consumers hardest, regardless of income. Without expanding direct taxation and reforming tax administration, they warned, the economy will face mounting structural imbalances.

The concerns were raised Monday at a roundtable titled “Overdependence on Indirect Taxes and Its Multidimensional Impact on the Economy,” organized by Voice for Reform at the BDBL Building in Karwan Bazar, Dhaka.

Presenting the keynote paper, MMC Advisory Services Director Snehasish Barua said Bangladesh’s indirect tax regime is fundamentally inequitable.

“A rickshaw puller and a millionaire businessman pay the same rate of indirect tax,” he said, noting that indirect taxes now account for nearly 65 percent of the country’s tax structure.

Barua warned that the increasing use of Tax Deducted at Source (TDS) is adding pressure on businesses, which are ultimately passing the costs on to consumers through higher prices.

He said excessive TDS burdens could also discourage service exporters from repatriating income, prompting them to keep earnings abroad, particularly in Singapore.

He argued that the new tax laws have largely retained the flaws of the old system, with little meaningful reform. He called for a rational VAT structure, gradual withdrawal of source taxes, and a shift away from excessive dependence on TDS-based revenue collection.

Policy Exchange Bangladesh Chairman Masrur Riaz said the real share of indirect taxes in Bangladesh may be closer to 80 percent when all forms of consumption-based taxation are considered.

“Tax policy should reduce inequality, not reinforce a system where markets remain concentrated in the hands of a few,” he said.

Riaz also cautioned against increasing indirect taxes further to address the government’s fiscal stress. While acknowledging the need for public-sector salary adjustments, he said the state’s current financial condition does not support higher expenditure and urged policymakers instead to strengthen direct tax collection.

Former Unilever Bangladesh Head of Tax Syed Ahmed Khan said tax reform is unavoidable, but past reforms have failed to deliver tangible benefits for consumers.

Economic Reporters Forum (ERF) President Daulat Akhtar Mala criticized what she described as indiscriminate tax collection driven by revenue shortages. She said mechanisms meant to refund excess tax payments remain largely ineffective.

She also questioned the effectiveness of the government’s Tk 400 crore tax modernization initiative, arguing that despite the massive investment, reforms have been limited mostly to online return submissions.

Bangladesh Restaurant Owners Association Secretary General Imran Hasan described doing business in the country as “a form of punishment,” alleging that corruption remains entrenched across the system. He added that the garment sector continues to face unresolved structural problems.

Former National Board of Revenue (NBR) VAT member Mohammad Fariduddin called for a simplified VAT regime with fewer tax slabs.

He said two reform reports prepared during the interim government period had already identified practical solutions, but policymakers and business groups showed little interest in implementing them.

Daily Waadaa Managing Editor Faisal Mahmud pointed to India’s GST reforms as a model Bangladesh could study.

A former Press Minister at the Bangladesh High Commission in New Delhi, Mahmud said India’s tax transformation, driven by demonetization, the introduction of UPI, the rollout of GST in 2017, and subsequent reforms, significantly widened the formal economy and boosted revenue collection while streamlining the tax system.

Other speakers, including Dhaka University Professor and RAPID Executive Director M Abu Yusuf and DU Assistant Professor Rushad Faridi, warned that the burden of indirect taxation inevitably falls on consumers, accelerating inflation and increasing living costs.

The discussants called for expanding the tax net, digitizing tax administration, and implementing deeper policy reforms to build a fairer and more competitive economy.

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