Emran Emon

At a time when the people of the country are struggling under the severe pressure of high inflation, the interim government imposed additional VAT and customs duties on country's consumers. Amid strong opposition from businessmen and entrepreneurs, the interim government suddenly increased the value-added tax (VAT) and supplementary duty on more than a hundred goods and services, which is a suicidal and anti-people decision at this critical transition in the country.

After the fall of the Awami League regime on August 5 following the July uprising, the public had expected that the interim government would strictly control the market and reduce the prices of essential commodities. However, that expectation has now turned into disappointment. Despite more than five months since the formation of the interim government, the government has still failed to control the market. As a result, the working class is facing immense suffering. Low-income people are already struggling to make ends meet, and the recent increase in value-added tax (VAT) on various goods and services has made their situation even more dire.

The government's decision to raise supplementary and excise duties has increased the prices of over a hundred goods and services. This will further reduce people's purchasing power. The hike in VAT on mobile phone services will raise the cost of calls and internet usage. With the increased VAT burden, consumers are facing a wall of challenges, leading to higher inflation. Businesses will face even more difficulties, which will have a negative impact on the national economy. The people of the country are now trembling under the weight of the VAT increase.

At a time when the people’s expectations for the creation of a "New Bangladesh" are sky-high, the interim government’s decision to increase VAT, is entirely an anti-people decision. The increase in supplementary and excise duties will negatively affect not only the overall economic activities but also foreign investments. Foreign investment in the country has already significantly decreased, and employment opportunities are shrinking. The ongoing political instability is already harming business and investment, and the hiking of VAT will complicate the situation further. Businesses will face even more difficulties for that 'suicidal' decision.

To meet the conditions for an IMF loan, the National Board of Revenue (NBR) recently issued an ordinance increasing VAT and supplementary duties over 100 items. As a result, the prices of these goods and services will increase. This list includes items such as: medicines, LPG gas, sweets, biscuits, pickles, tomato sauce, fruit juices, cigarettes, soap and detergents, mobile services, broadband internet, and airfares. Moreover, the threshold for turnover-based registration and VAT registration has been reduced. This will force small and medium-sized enterprises to comply with VAT regulations, which will increase their operational costs.

Other goods whose prices may increase include kitchen towels, toilet tissue, sunglasses, eyeglass frames, sweets, mattresses, transformers, LPG gas, ferro manganese (raw material for rod production), tomato sauce, pickles, cakes, biscuits, paints, fruit juices, fruit drinks, soaps, detergents, varnishes, and all types of fresh fruits. VAT has been increased by 5/7.5% to 15% on these products, which is like a 'rubbing salt on wounds' of the people in a developing country like Bangladesh.

Due to the poor state of the country’s economy, inflation continues to rise, especially in food prices. As a result, the middle and lower-income people are struggling. A recent report from the Economic White Paper Committee stated that the real inflation rate is between 15 to 17 percent, although the latest figures from the Bureau of Statistics show the inflation rate for 2024 at 10.34 percent, up from 9.48 percent in 2023. Last year, people were under severe inflationary pressure, and their income did not increase in proportion to the rising prices.

In December, food inflation was 12.92 percent, and overall inflation was 10.89 percent. These inflation rates remaining in double digits mean that people with fixed incomes are struggling to manage their household expenses. With income increasing at a slower rate than inflation, people's suffering is intensifying.

While inflation has risen sharply, wages have increased very little. In the first 11 months of the current year, general inflation increased by 1.52 percent, and food inflation by 4.24 percent. In contrast, wages have risen by only 0.33 percent. With inflation high and wages stagnant, consumers have had to cut back on their spending, and many have resorted to taking loans. As a result, their savings have decreased. Although the interim government has taken steps such as raising interest rates and reducing some duties, inflation has not been effectively controlled.

At a time when people are already struggling due to excessive inflation, introducing a large-scale VAT hike is an anti-people decision. The Finance Adviser to the interim government, Dr. Salehuddin Ahmed, has stated that although VAT has been increased in various sectors, the price of goods will not be significantly affected. This is an irresponsible and laughable statement! The goods on which VAT has been increased are essential commodities for the consuming public. Such a decision will further slow down the country’s economy. Currently, the country in experiencing high inflation, which has led to the high price of the dollar. After August 5, there has been a stagnation in investment in the country, foreign investment has decreased significantly, and the interest rates on loans are very high. Overall, in such a situation, the country's economy and its people will fall into a severe crisis.

In the current economic crisis and in order to revive the country's economy, the government should have focused on preventing tax evasion, breaking up syndicates, and ensuring better market monitoring. Instead, the government has increased VAT, which is a completely suicidal and anti-people decision. Such a decision will push the country towards a severe crisis.

The writer is a researcher, journalist and columnist.