Own Reporter : The increase in value added tax (VAT) at the retail level at a rate of 2.5 percent on all products will create unequal competition in business. Those who regularly pay VAT will be in greater danger. They will not be able to survive by competing. Those who do not pay VAT tax will benefit more. However, it was necessary to reduce the VAT rate and increase collection. Instead of going in that direction, those who pay VAT will have no choice but to close their businesses because the additional VAT rate is imposed on them.
The concerned people said that there is a risk that the industrial sector will stumble due to the increase in VAT from 5 percent to 7.5 percent. Investments have recently started coming into various sectors in Bangladesh. Already, a huge amount of investment has come into the skin care, hair care, home and personal care and beauty product sectors. As a result, employment opportunities have increased at a massive rate. But the new VAT policy is going to have a huge negative impact on the sales of those products at the retail level. This will increase production costs, increase product prices, competitive pressure, shrink employment and uncertainty in the business environment. The stability of the domestic industry will be threatened. Therefore, the concerned businessmen and entrepreneurs have called for formulating a favorable tax policy instead of increasing VAT to continue the development trend of domestic industrial institutions and local businesses. Businessmen and economists have claimed that the additional VAT increase will create obstacles not only in those sectors but also in the progress of the overall economy, including trade and investment. According to them, at a time when the people of the country are constantly struggling due to the ongoing inflation, the life of the poor and middle class will become more difficult due to the increase in VAT rates. Jamal Uddin, General Secretary of the Association of Skin Care and Beauty Products Manufacturers and Exporters of Bangladesh (ASBMEB), said that there are many businesses in Bangladesh that do not pay VAT tax regularly. For example, most of the items in the cosmetics industry are entering the country’s market duty-free through smuggling. And this additional pressure on those who are running the cosmetics business by paying VAT tax as per the rules is creating an unequal competition. In this competition, it will be difficult for genuine products to survive with counterfeit products. We think that it is necessary to reduce the VAT rate and consolidate the system of collecting VAT from everyone. He further said that the effect of increasing the VAT rate will increase the price of the product, which will reduce sales due to the increase in price. Due to which the production capacity and income of the domestic industry may shrink. In addition, the production cost of the product will also increase due to the increase in the VAT rate on raw materials and product transportation services. Which will create obstacles in the development of the domestic industry and cause financial losses to entrepreneurs.
International Business Forum of Bangladesh (IBFB) Vice President MS Siddiqui said that at the local business level, VAT was imposed on all products at a rate of 5 percent, which has been increased to 7.5 percent. As a result, the consumer will have to spend an additional 2.5 percent more to buy any product. This has increased the daily living expenses of the people once again. The high prices will create disinterest in consumers in buying products, which will also affect the local business community economically.
Former director of the apex business organization FBCCI, Ishaqul Hossain, said that recently, the country’s business and trade have suffered a major setback in the social and political context. The business situation has not yet returned to normal. In such a situation, investors will have to face financial losses due to the increase in VAT rate.
Eminent economist Professor Dr. Muhammad Mahbub Ali believes that the impact of the increase in VAT can be serious on the local industry. With the increase in production costs, the price of products will increase, competitive pressure, shrinking employment, and uncertainty in the business environment will increase. Overall, the stability of the domestic industry will be threatened. Therefore, if the government wants to ensure the development and growth of the domestic industry, it should not increase VAT but formulate a balanced tax policy so that domestic industrial institutions and local businesses can develop to their full potential.