Prime Minister Tarique Rahman has instructed revenue officials not to increase taxes on essential commodities in the upcoming national budget, aiming to reduce pressure on low- and middle-income consumers amid persistent inflation.
The directive came during a meeting with officials of the National Board of Revenue (NBR) at the Secretariat on Thursday, where preparations for the proposed budget for fiscal year 2026-27 were discussed, officials said.
During the meeting, the prime minister also asked officials to introduce a five-year “prospective tax rate” framework, replacing the existing two-year system, in a move aimed at improving policy predictability for businesses and investors.
Officials familiar with the discussion said the meeting also reviewed a proposal to raise the tax-free income threshold for individual taxpayers from Tk3.5 lakh to Tk4 lakh.
Besides, the meeting decided to reduce taxes on all electric private cars except high-end electric vehicles.
Officials also decided to raise the advance income tax on luxury private vehicles, or cars with engine capacities above 3,500cc, from Tk2 lakh to Tk10 lakh.
However, the advance income tax on vehicles with engine capacities up to 1,500cc will remain unchanged at Tk25,000.
A prospective tax rate is a pre-announced tax structure kept unchanged for a fixed period, allowing businesses to plan investment, production costs and expected returns with greater certainty.
According to officials, frequent changes in tax rates have made it difficult for businesses to undertake long-term investment planning, discouraging industrialisation and foreign direct investment.
Business leaders argued that a two-year tax regime is insufficient for industrial investment, as most manufacturing projects require four to five years to begin production and generate profits.
A longer-term tax structure would allow investors to better assess future costs and returns, they said.
“The biggest problem with Bangladesh’s tax policy is uncertainty. Businesses cannot make long-term plans because tax rates change every year through the budget. A five-year tax framework would increase investor confidence,” Shams Mahmud, former president of Dhaka Chamber of Commerce & Industry (DCCI), told TIMES of Bangladesh.
Economists also said many investment-friendly countries follow medium- to long-term tax policies to provide certainty to investors. Competitor economies such as Vietnam, Indonesia and India have maintained stable tax incentives and rates for specific sectors over extended periods.
Zahid Hussain, former lead economist of the World Bank Dhaka office, said, “Predictability is one of the most important factors for investment. Frequent changes in tax rates raise business costs and increase uncertainty. A long-term tax framework could therefore have a positive impact on the economy.”
Meanwhile, as part of the government’s efforts to avoid raising taxes on essential items, the existing VAT exemption on liquefied petroleum gas (LPG) imports is likely to remain in place in the next fiscal year.
NBR officials said the move aims to contain price pressures at the consumer level and maintain market stability.
Earlier this year, on 16 February, NBR issued a notification withdrawing the 7.5 per cent VAT imposed at the local production and trading stages of LPG, along with a 2 per cent advance tax at the import stage.
At the same time, a 7.5 per cent VAT was imposed on imports, effective until 30 June 2026.
According to NBR, the removal of VAT at the local production and sales stages effectively eliminated additional VAT layers after import, reducing the overall VAT burden on LPG by nearly 20 per cent at the consumer level.
The revenue authority said the decision was taken to keep LPG prices affordable for households and industries and ensure market stability for an essential fuel product.
The measure followed requests from the LPG Operators Association of Bangladesh and recommendations from the Ministry of Power, Energy and Mineral Resources.
Officials said the administration remains positive about continuing the facility in the next budget as the LPG market is still facing volatility due to fluctuations in global prices, dollar exchange rates and rising transportation costs. Removing the VAT benefit now could lead to higher retail prices, they added.
Industry insiders said LPG consumption has been rising rapidly across industrial, residential and commercial sectors due to limited pipeline gas connectivity in many parts of the country. In many newly developed residential areas outside major cities, LPG has become the primary fuel source.
According to data from the Bangladesh Energy Regulatory Commission, annual LPG demand in Bangladesh stands at around 1.5 million to 1.6 million tonnes, with multiple private companies engaged in importing and marketing the product.
Officials at the finance ministry said that although the government is under pressure from the International Monetary Fund to implement revenue reforms, discussions are ongoing to retain tax exemptions in selected sectors to limit the impact on fuel and essential commodity prices.
