B Mirror Report:  The Policy Research Institute of Bangladesh (PRI) today organized a policy dialogue titled “Rationalizing Supplementary Duty and VAT in Bangladesh: Evidence, Challenges, and Reform Pathways,” bringing together policymakers, economists, development practitioners, and industry leaders to discuss challenges in the country’s tax system and outline reform priorities amid rising revenue pressures.

The event was attended by Zakir Ahmed Khan, Chairman of the Palli Karma Sahayak Foundation (PKSF), as chief guest. He said the main challenge in tax reform is not technical capacity but weak implementation and lack of attention to political economy realities.

He stressed that occasional consultations with sectors are insufficient and called for more structured and frequent engagement. He also emphasized stronger enforcement of existing tax laws, particularly addressing cash-based transactions and underreporting, as an immediate source of revenue improvement.

He further highlighted the need for institutional reform, including separating tax policy from tax administration. He suggested that policy should be designed by a dedicated research-based unit, while enforcement should remain with the National Board of Revenue (NBR). He also noted an estimated revenue shortfall of around Tk 100 billion in the current fiscal year.

The session was chaired by Dr Zaidi Sattar, Chairman of PRI, who called for a more efficient and balanced tax structure. He said Bangladesh’s complex import tax system has contributed to higher domestic prices and market distortions, stressing the need for an optimal supplementary duty structure.

Special guest Fariduddin Ahmed criticized outdated administrative systems at the NBR, highlighting delays in reporting, manual processes, and a complex tariff structure. He also reiterated the need for separating tax policy from administration and modernizing the system.

In the keynote presentation, Dr Bazlul Haque Khondker pointed to inefficiencies caused by overlapping VAT and supplementary duties, recommending better sequencing of indirect taxes. He noted that although Bangladesh maintains a 15 percent VAT rate, revenue performance remains weak due to a narrow tax base and compliance gaps.

Another keynote speaker, Hafiz Chowdhury, called for redesigning excise taxes to better reflect health and environmental impacts. He emphasized shifting toward specific taxation models and strengthening digital enforcement tools to improve compliance.

Panel discussions highlighted concerns over regulatory distortions, declining revenue performance, and the need for improved transparency. Speakers noted that some import taxes are being used for protectionist purposes rather than revenue or public health objectives.

Representatives from the World Bank supported clearer separation of tax instruments based on policy objectives, stressing that VAT should focus on revenue, income taxes on equity, and excise duties on externalities.

Industry representatives, including from Coca-Cola Bangladesh, expressed concern over rising tax burdens on compliant businesses and called for broader tax base expansion rather than increased pressure on existing taxpayers.

The dialogue concluded with a consensus on the need for major VAT and supplementary duty reforms, stronger institutional capacity at the NBR, improved data transparency, and a more coordinated tax policy framework to support sustainable revenue growth and economic competitiveness.