Japan-Bangladesh Chamber seeks VAT reform, withdrawal of minimum tax

The Japan-Bangladesh Chamber of Commerce and Industry (JBCCI) has urged the government to undertake major VAT and tax reforms in the upcoming FY2026-27 budget, including introducing a single VAT rate, withdrawing minimum tax for loss-making companies and lowering corporate tax to attract investment.

Speaking at a pre-budget press conference in Dhaka today (10 May), JBCCI President Tareq Rafi Bhuiyan said Bangladesh is going through a critical economic transition amid global uncertainty, inflationary pressure, rising financing costs and preparations for post-LDC graduation.

In this context, he said, the national budget should prioritise investment, industrial competitiveness and fiscal modernisation instead of focusing mainly on revenue collection.

One of the chamber's key recommendations was reducing the standard VAT rate from 15% to 7.5% and introducing a unified VAT structure.

According to JBCCI, the existing multi-tier VAT system increases compliance costs, creates complexity and leads to classification disputes between businesses and tax authorities.

"A simplified VAT framework would improve the ease of doing business, particularly for SMEs and emerging industries," the chamber said.

JBCCI also called for the withdrawal of the minimum tax based on gross receipts for businesses incurring losses.

The chamber argued that the current system places additional financial pressure on companies even when they are not profitable, discouraging investment and affecting business sustainability.

It further proposed removing withholding tax obligations for loss-making firms and ensuring that excess tax deducted at source remains refundable.

Maria Haowlader, general secretary of the chamber, said delays in VAT and income tax refunds often create liquidity pressure and block working capital for businesses.

To address this, the chamber recommended introducing a faster, automated and time-bound refund mechanism to improve business confidence and tax compliance.

The business chamber also proposed reducing the corporate tax rate for the private sector from 25% to 20% to strengthen Bangladesh's competitiveness in attracting both local and foreign investment.

It noted that many competing economies are adopting lower corporate tax regimes to attract foreign direct investment, while Bangladesh's comparatively high tax burden discourages industrial expansion and capital inflow.

JBCCI further recommended rationalising Tax Deducted at Source (TDS) and withholding tax rates for suppliers, subcontractors, service providers, rental payments and foreign service providers.

According to the chamber, excessive advance and withholding taxes increase working capital pressure and raise the overall cost of doing business.

The chamber also sought reductions in customs duty, regulatory duty, advance tax and advance income tax on industrial raw materials, renewable energy equipment, healthcare products and manufacturing inputs to improve industrial competitiveness.

In addition, JBCCI proposed sector-specific fiscal support for industries including ready-made garments, information technology, pharmaceuticals, construction, agriculture and healthcare.

The recommendations include lower source tax on exports, tax holidays for strategic industries, VAT exemptions on machinery and raw materials, and incentives for green and sustainable investments.