Business leaders oppose 0.2% AIT on retail supplies

Business leaders have urged the government to withdraw the proposed 0.2 percent advance income tax (AIT) on supplies made to retailers, saying it would create complications for businesses and increase compliance costs.

The call came at a dialogue titled “Tax Justice in the National Budget: Observations on Fiscal Proposals for FY2026–27”, held yesterday at BRAC Centre Inn in Mohakhali, Dhaka. The event was organised by the Centre for Policy Dialogue (CPD).

Under the proposed budget, a 0.2 percent AIT would be imposed on goods supplied to retailers, meaning Tk 2 would be deducted as tax on every Tk 1,000 worth of supplies.

“The proposed tax, combined with the existing 1 percent turnover tax, would put extra financial pressure on compliant taxpayers in the formal sector,” said Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry.

He added that if the 0.2 percent AIT is deducted at the point of sale to retailers, it would create confusion over whose name the tax should be deposited in.

Questioning the rationale behind turnover tax and AIT for small businesses, Rahman said nearly 85 percent of Bangladesh’s economy remains informal, while only around 15 percent is formal.

He added that many retailers in the informal economy do not have Taxpayer Identification Numbers (TINs) or Business Identification Numbers (BINs).

Responding to the concerns, Mutasim Billah Faruqui, member (tax policy) at the National Board of Revenue (NBR), said simplifying the tax system and reducing compliance costs remain key priorities.

“To ensure existing taxpayers are not burdened with higher taxes or tax rates, we are expanding the tax base,” he said.

“Suppliers and retailers are being brought into the tax chain. The amount is very small -- just Tk 2 on every Tk 1,000. The objective is not to raise large revenue, but to bring everyone under a structured system,” he added.

CONCERNS OVER WIDER TAX BURDEN

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the proposed budget includes some reforms in tax management, but several provisions could worsen challenges for the garment sector.

Chartered accountant Snehasish Barua said restoring the 5 percent personal income tax slab is necessary to ease pressure on low- and middle-income taxpayers.

He warned that rising corporate tax rates and higher effective tax burdens could increase the risk of capital flight, affecting investment and jobs.

Rizwan Rahman, former president of the Dhaka Chamber of Commerce and Industry, questioned increased spending on education, saying governance and accountability matter more than higher allocations.

He added that the budget offers no meaningful improvement in access to finance for small and medium enterprises and suggested a revised classification, separating medium enterprises while grouping cottage, micro and small businesses to enable more targeted policy support.

Bdjobs founder Fahim Mashroor said indirect taxation remains one of the biggest injustices in the tax system, noting that a rickshaw puller and a wealthy consumer pay the same tax rate on mobile talk time despite large income differences.

In his keynote speech, Tamim Ahmed, senior research associate at CPD, called for major tax reforms to improve fairness, transparency and compliance.

He stressed the need for VAT reform, tariff rationalisation, digitisation of the NBR, stricter enforcement and institutional reforms to build a transparent and efficient tax system.