Bangladesh is considering raising the top income tax rate to 35% for its highest earners in the upcoming national budget, a move aimed at narrowing the country's widening wealth gap, according to sources at the National Board of Revenue (NBR).

Taxpayers earning more than Tk1.5 crore annually – over Tk12.5 lakh per month – would fall under the proposed higher slab, up from the current 30% ceiling applied to income above Tk35.75 lakh a year.

If approved, the revised rate is expected to take effect from FY2028-29 and remain in force for three years. The finance minister is likely to table the proposal in June.

"The objective is to impose higher taxes on the super-rich to reduce income inequality between the rich and the poor," a senior NBR official said on condition of anonymity.

NBR officials estimate that more than 30,000 taxpayers fall within this bracket, with the measure projected to generate an additional Tk4,000 crore annually. NBR Chairman Abdur Rahman Khan had first indicated the plan in March during budget discussions.

The proposal has drawn mixed reactions. Transparency International Bangladesh (TIB) Executive Director Iftekharuzzaman called the move broadly positive in principle, saying higher earners should contribute more, but warned that rate hikes alone would not significantly improve revenue unless tax evasion is addressed.

Centre for Policy Dialogue (CPD) Additional Research Director Towfiqul Islam Khan also cautioned against repeatedly increasing pressure on compliant taxpayers, arguing that structural weaknesses in tax administration remain unresolved and that expanding the tax base should be the priority.

Taking a stronger view, tax expert and SMAC Advisory Services Managing Director Snehasish Barua called the proposal a "fiscal misstep," arguing that it penalises honest taxpayers while ignoring the large shadow economy.

He noted that nearly two-thirds of 12.8 million e-TIN holders do not file returns, leaving the tax net "dangerously narrow." He warned that higher marginal rates, combined with wealth taxation, could raise effective burdens further, risking capital flight and discouraging domestic investment and employment generation.

Instead, he urged greater reliance on digital tracking systems to formalise the economy and incentivise transparency rather than overburdening a small compliant base.

Exporters may need to add more value – at least by 50% – to products as the government drafts a new policy with a stronger push for reduced reliance on imported inputs and the development of backward linkage industries.

One of the biggest changes proposed in the draft Import Policy Order 2026-2029, seen by TBS, is a sharp increase in the minimum value-addition requirement for garment exports made from imported raw materials.

Officials say if an exporter fails to meet the requirement, it will not receive any cash incentive and the duty benefits on raw material imports.

For children's garments, the minimum value addition requirement may double from 15% to 30%. For all knit and woven garments made from cotton and man-made fibres, the threshold could rise from the existing 20% to 30%.

A stakeholder meeting is scheduled for today, where Commerce Minister Khandakar Abdul Muktadir is expected to discuss the draft policy with industry representatives ahead of finalisation.

If approved and implemented, the comprehensive new trade directive will remain effective until 31 December 2029.

Higher value addition requirements

Under the current import policy, there is no minimum value-addition requirement for the export of goods, except for knitwear, woven garments, and children's clothing.

However, under the draft policy, stricter value addition thresholds have also been proposed for several other export sectors. Underwear and other synthetic fibre-based specialised garments may be required to meet at least 40% value addition.

Footwear, including leather and non-leather products, may be subject to a 30% requirement. Ship exports could be subject to a 40% threshold, while wooden furniture exports may be required to achieve 50% value addition.

The draft policy also proposes a ban on importing knitted fabrics, a move that has drawn criticism from industry leaders who argue that domestic production is insufficient to meet export demand.

Exporters warn against higher thresholds and fabric bans

Bangladesh Garment Manufacturers and Exporters Association President Mahmud Hasan Khan told TBS while a 30% value addition is achievable for the knitwear sector, it remains entirely unrealistic for the woven garment segment under present market conditions.

Echoing these concerns, Bangladesh Knitwear Manufacturers and Exporters Association President Mohammad Hatem said while the government's targeted thresholds might be feasible in isolated cases, the prevailing international market dynamics make them impossible to implement across the board.

Apparel leaders heavily criticised the clause in the draft policy that seeks to enforce a blanket ban on the import of knit fabrics.

The BGMEA president argued that Bangladesh must maintain open channels to import specialised knit fabrics that are not locally manufactured, warning that failing to do so would severely cripple export competitiveness.

Adding to this, Hatem explained that halting knit fabric imports would require massive immediate investments in the domestic dyeing sector alongside guaranteed gas supplies.

The BKMEA president warned that banning fabric imports would derail crucial product diversification into high-value knitwear when "the government is currently unable to ensure consistent gas distribution and the broader economic climate is unsuited for heavy capital expenditure."

Preventing money laundering

Md Hafizur Rahman, former director general of the WTO Cell under the commerce ministry, told this newspaper that the value addition rate might be increased to prevent exporters from repatriating lower export proceeds as a means of money laundering, despite exporting at higher prices. "At the same time, encouraging exporters to use local materials could also be an objective."

However, he noted that since Bangladesh's primary goal is job creation, raising the minimum threshold for value addition is not logical. "This could hamper exports from smaller factories, which would ultimately shrink employment opportunities."

Hafizur added, "Vietnam does not have such stringent value addition requirements. Many small factories in that country import from China, add a minimal amount of value, and then export."

Changes in import entitlement rules

While the import of used vehicles, motor cars, passenger cars, and trucks older than five years remains prohibited as before, the draft import policy proposes to allow the import of electric vehicles that are up to 10 years old.

The policy also proposes changes to export-linked import entitlements under free-of-cost arrangements. The existing entitlement of up to 50% of the previous year's export value for garments, woven and children's clothing would remain unchanged. However, for man-made fibre products and synthetic underwear, the limit may be increased from 50% to 70%.

For footwear and leather goods, the proposed import entitlement is 60% of the previous year's export value. Ship imports would be allowed up to 60% of the export letter of credit value. Furniture-related import limits have been proposed at 40% for wooden furniture, 20% for fabric-based furniture and 10% for parts and accessories.

Trade facilitation and sector-specific reforms

The draft order removed the existing $5,00,000 ceiling on imports under sales or purchase contracts without opening letters of credit, expanding flexibility for businesses.

It also proposes eliminating fixed time limits for shipment after opening letters of credit, which currently stand at 24 months for machinery and nine months for other goods.

The threshold for personal imports by non-registered importers has been proposed to be doubled from $10,000 to $20,000.

For expatriate Bangladeshis, the duty-free limit for sending goods to family members has been proposed to be raised from Tk10,000 to $1,000.

Export-oriented garment manufacturers may also see an increase in the annual import quota for samples, rising from 1,500 to 3,000 items per category. Similar increases have been proposed for the footwear and leather industries, while tanneries may see their sample import limit rise from 300 to 3,000 pieces.

Policy alignment and geopolitical provisions

Although the draft did not explicitly refer to the United States trade agreement, it allowed reduced tariff imports under certificates of origin linked to preferential and free trade agreements with various countries and regions.

The draft introduced a direct prohibition on imports from Israel, stating that no goods produced in or originating from Israel, nor cargo carried on Israeli-flagged vessels, will be eligible for import.

The EU hopes Tuesday to strike a deal towards implementing its nearly year-old trade pact with the United States -- with an increasingly impatient Donald Trump threatening steep new tariffs unless it is done by July 4.

The 27-nation bloc struck an accord with Washington last July setting levies on most European goods at 15 percent, but to the US president's frustration a final version of the text still needs nailing down on the EU side.
Google News LinkFor all latest news, follow The Daily Star's Google News channel.

"A deal is a deal," the US mission to the EU posted on X Monday, saying the bloc "must live up" to the agreement sealed in Turnberry, Scotland, between Trump and EU chief Ursula von der Leyen.

Negotiators from the EU's parliament and capitals will meet Tuesday night in Strasbourg to push for a compromise that would allow the bloc to meet Trump's deadline and hopefully turn the page on more than a year of transatlantic trade battles.

Short of that, Trump has warned the EU should expect "much higher" tariffs -- and has already vowed to raise duties on European cars and trucks from 15 to 25 percent.

The tariff blitz unleashed by Trump before the Turnberry accord, including hefty levies on steel, aluminium and car parts, jolted the bloc into cultivating trade ties around the world.

But the EU cannot afford to neglect the 1.6-trillion-euro ($1.9-trillion) relationship with the United States, its largest trade partner.

Cyprus, which holds the rotating presidency of the EU, said its goal "remains, the swift implementation of the EU-US joint statement".

To reach a compromise with member states, parliament is under pressure to renege on several amendments it added to the text in March which the Americans consider unacceptable.

The head of parliament's trade committee, Bernd Lange, struck an optimistic note, saying the sides had "already made a lot of progress".

"I hope we can reach a compromise, including new propositions," Lange said.

But first, he needs to hammer out a common stance between the parliament's different factions, which looked set to keep haggling until the last moment.

The EU parliament's conditional green light came after months of delay caused by Trump's designs on Greenland and a US Supreme Court ruling striking down many of the president's levies.

The assembly's largest force, the conservative European People's Party to which von der Leyen belongs, is now pushing hard to implement an accord it says is vital to ending a period of damaging uncertainty for EU businesses.

EPP lawmaker Zeljana Zovko told AFP she was "confident that we will get it done".

The EPP has firm support from the hard-right ECR party, whose shadow rapporteur on the file, Kris Van Dijck, also said he was "cautiously optimistic".

But several political groups had yet to make their position public as of Monday night, and it remained unclear how far the majority would compromise to get a deal.

Lawmaker Kathleen Van Brempt of the Socialists and Democrats, parliament's second-biggest group, said they would "engage constructively" but fight for safeguards "to guarantee stability, predictability and protection for European businesses and workers".

One bone of contention is a suspension clause toughened by parliament that would scrap favourable tariff conditions for US exporters, should the United States later breach the terms of the deal.

Another concerns so-called "sunrise" and "sunset" clauses under which the EU side of the accord would kick in once the United States makes fully good on its pledges, and would expire unless renewed in 2028.

Green lawmaker Anna Cavazzini said "the odds are good" but warned member states would need to "budge" on parliament's main priorities.

"These past weeks have shown time and again that Trump is not to be trusted, so the EU needs stronger tools at hand," she said.

Bangladesh Bank has introduced new rules for cashing out money from card-based mobile financial service (MFS) accounts, aiming to strengthen verification and transaction security.
Under the new rules, customers must first complete a successful transaction of up to Tk 500 using the card before linking it with an MFS account. The account can only be connected 24 hours after the transaction is completed.
The circular also said that from August 1 this year, MFS cash withdrawals through cards will be allowed only if the MFS account and the card are verified under the same ownership. Transactions involving mismatched ownership information will not be permitted.

The central bank said the changes will apply to all MFS providers and scheduled banks operating in the country.
In a circular issued by the Payment Systems Department yesterday, the central bank outlined several conditions for card-to-MFS cash withdrawal services. The instructions were sent to managing directors and chief executives of all concerned institutions.

Bangladesh Bank has also instructed service providers to introduce systems that clearly identify transactions as card-based rather than merchant payments.

At the same time, beneficiary account numbers must not remain blank during card-linked transactions.

The central bank warned that institutions failing to make the required changes by July 31 this year would not be allowed to continue offering card-to-MFS cash withdrawal services from August 1.

The circular further said that earlier instructions issued on March 27 last year regarding other transactions through MFS accounts would remain in force. All new directives will take immediate effect.

The government will include provisions or support for every community in the budget for the fiscal year 2026-27 as part of its pledge to democratise the economy.

“Many groups appeared to have been excluded from past budgets. There were no programmes for them-- no support. We will address every group in this budget,” said Finance Minister Amir Khosru Mahmud Chowdhury

He made the remarks in an interview with The Daily Star on the sidelines of the Asian Development Bank’s annual general meeting in the first week of May in Samarkand, Uzbekistan.

Khosru, who previously served as commerce minister during the BNP’s last tenure in power more than two decades ago, is now overseeing both the finance and planning ministries.

The current government’s slogan is the democratisation of the economy. If the economy is to be democratised, every group must be included, and the benefits of the economy must reach their homes, he said.

“We are planning the budget with this in mind.”

Khosru said the government had little time to formulate the upcoming budget, which is “a difficult task”.

“All indicators of the economy that we received from the previous governments were on the decline. On top of that, there is the war in the Middle East -- we have to face this crisis day after day,” said the minister.

“You can certainly understand how hard it can be. But still, we are optimistic,” he added, noting that when the BNP had previously come to power, it restored macroeconomic stability and discipline in the financial sector.

Bangladesh Bank (BB) has instructed treasury heads of commercial banks to play a responsible role and refrain from manipulating the US dollar exchange rate in order to keep the foreign exchange market stable.

BB Governor Md Mostaqur Rahman gave the instruction at a meeting between the central bank and treasury heads of commercial banks, held at the BB headquarters in Dhaka today.

Treasury heads of three private commercial banks, seeking anonymity, told The Daily Star that the BB governor asked them for suggestions on how to stabilise the forex market and exchange rate.

Recently, several banks increased their forward booking of US dollars, which affected the market, prompting the authorities to call the meeting.

According to them, the governor said the banking regulator does not want to intervene directly in the market and therefore asked banks to behave responsibly.

One of the treasury heads said officials of the central bank raised questions about forward selling and asked banks to rationalise the practice, saying it contributes to volatility in the forex market.

The official also said it would be difficult to stop forward selling as it works like insurance.

Forward selling in the forex market involves entering into an over-the-counter (OTC) contract to sell a specific amount of one currency for another at a predetermined exchange rate on a fixed future date.

It allows businesses and investors to lock in exchange rates and eliminate currency risk.

The treasury heads also said they informed the central bank during the meeting that there is little scope for banks to manipulate the market.

According to them, exchange houses and exporters are more likely to be responsible for market volatility.

The treasury heads also informed the governor that central bank officials had verbally instructed lenders not to increase the US dollar rate, which they described as a form of intervention.

A senior official of the central bank told the newspaper that the banking regulator warned lenders not to get involved in market manipulation.

The interbank exchange rate has been hovering at Tk 122.75 per US dollar for the past one and a half months.

On Tuesday, banks were buying US dollars at Tk 122.75 per dollar and selling them at Tk 123.50 per dollar.

To keep the forex market stable, the banking regulator has also continued buying US dollars from the market. Yesterday, it purchased $85 million from six commercial banks at a cut-off rate of Tk 122.75.

As a result, total purchases in the current fiscal year have surpassed $6 billion, according to BB data.

Bangladesh Bank has been buying US dollars since the beginning of the current fiscal year amid improved inflows and easing pressure on the foreign exchange market.

The treasury heads argued that the forex market has not yet become fully market-based.

“Bangladesh Bank still intervenes at times in determining the exchange rate. Even during dollar purchases through auctions, the central bank provides instructions.”

BB Deputy Governor Md Habibur Rahman, Executive Director Sarwar Hossain, Director of the Foreign Exchange Policy Department Md Bayezid Sarker, and other officials of the department were present at the meeting.

Bangladesh’s steel manufacturers yesterday urged the government not to raise electricity tariffs further, saying higher energy costs could deepen the sector’s crisis by triggering production cuts, financial losses and possible factory closures.

At a press briefing organised by the Bangladesh Steel Manufacturers Association (BSMA) at the Economic Reporters’ Forum in Dhaka, industry leaders said the sector was already under pressure from rising utility prices, weak demand, high borrowing costs and low utilisation of installed capacity.

“If electricity prices are increased again, production costs will rise sharply, and many factories may be forced to reduce output. Some could even face partial or complete shutdown,” said Mohammad Jahangir Alam, president of BSMA.

The association said industrial electricity tariffs have risen around 30 percent in recent years, while gas prices for some industries climbed nearly 300 percent, hurting the competitiveness of one of the country’s largest manufacturing sectors.

As part of the ongoing electricity tariff review, the Bangladesh Power Development Board submitted a proposal to the Bangladesh Energy Regulatory Commission seeking higher bulk electricity purchase rates.

BSMA said the proposed tariff hike comes at a time when steel makers are still dealing with the fallout from the Covid-19 pandemic, global supply chain disruptions, the Russia-Ukraine war, exchange rate volatility and geopolitical uncertainty in the Middle East.

The association also criticised demand charges, additional VAT and power factor penalties imposed on industrial consumers, saying those charges effectively act as indirect tariff increases.

According to BSMA, most large steel mills receive electricity through high-voltage connections ranging from 33kV to 230kV, where transmission and distribution losses remain low. Despite this, industries continue to bear additional charges.

It also questioned the power sector’s capacity payment system, claiming that more than Tk 50,000 crore is paid annually in capacity charges even as industries struggle with rising energy bills and inadequate gas supply.

BSMA urged the government to keep electricity prices unchanged for the steel sector, reduce demand charges and VAT, review power factor surcharges and introduce special tariff facilities for high-voltage industrial consumers.

Responding to reporters, BSMA President Jahangir Alam said many mills were operating at a loss amid sluggish construction demand, rising financing costs and increasing production expenses.

He said an additional Tk 2,000 in production costs per tonne would be difficult for the construction sector to absorb and could further slow real estate and infrastructure activities.

“Many factories were built with significantly higher production expectations, but now they are operating at only around 40 percent capacity,” he said.

BSMA Secretary General Suman Chowdhury said electricity accounts for nearly 30 percent of steel production costs, making the industry highly vulnerable to tariff hikes.

According to BSMA, annual steel demand in Bangladesh has fallen to around 40-50 lakh tonnes against the installed production capacity of nearly 1.2 crore tonnes.

Among others, Salam Group Chairman Md Rezaul Karim and BSMA Vice-President Sk Masadul Alam Masud, who is also managing director of Shahriar Steel Mills Ltd, addressed the briefing.

Bangladesh's private bank owners have urged the government to toughen laws to help recover huge default loans and heal the ills facing banks following "massive looting" during the past political regime
They placed the demand Tuesday at a meeting with Finance Minister Amir Khosru Mahmud Chowdhury at his secretariat office in the capital, ahead of a crucial budget coming soon.

Chairman of Bangladesh Association of Banks (BAB) Abdul Hai Sarker led the delegation of bank owners at the meeting, where a detailed discussion took place on banking situation.

"If the government toughens the laws, at least 60 per cent of bad loans can be recovered very easily," Mr Sarker told The Financial Express after the meeting, referring to their talks with the minister.

He says they demanded preparing a law on mandatory physical presence of the loan defaulters at the court dock instead of allowing them to be represented by a lawyer only.

"Many loan defaulters who fled abroad are avoiding repayment of loans, and at the same time, ensuring presence at court by a representative which leads to inordinate delay in loan recovery."

Also, the BAB demanded bringing an amendment regarding how many people of a family can be director of a bank company.

Mr Sarker says they requested the finance minister to take measures so that people's confidence in banking sector can be restored. He says the finance minister has assured the bank owners that the government will follow international best practices in the case of banking sector.

"Necessary measures will be taken to eliminate the irregularities," Mr Sarker quoted the minister as saying.

Earlier, a delegation of the Foreign Investors' Chamber of Commerce and Industry (FICCI), led by its president Rupali Haque Chowdhury, met the finance minister at his office discussing the upcoming national budget for FY 2026-27 and broader economic priorities under the new government.

During the meeting, the two sides exchanged views on the country's investment climate, current economic challenges, and measures needed to attract greater foreign direct investment (FDI).

The FICCI representatives emphasised the importance of a predictable and business-friendly policy environment, highlighting the need for a long-term budgetary roadmap that would enable investors to better anticipate tax structures and make informed investment decisions.

The chamber also stressed the importance of competitive tax policies, policy consistency, and transparency to strengthen investor confidence and enhance Bangladesh's competitiveness among peer economies.

Ms Chowdhury told The Financial Express that during the meeting, they also discussed the corporate tax rate as nominal corporate rates may seem low but the effective tax rate remains excessively high due to various non-deductible expenses and administrative hurdles.

She underscores the need for broadening the tax base rather than increasing pressure on existing taxpayers, a principle the minister reportedly acknowledged as a necessary direction for future budgetary policy.

Senior vice-president of the FICCI Deepal Abeywickrema and vice-president Mohammad Iqbal Chowdhury also attended the meeting, among other directors.

The Bangladesh Bank is set to introduce stricter rules for transferring money from bank cards to mobile financial services (MFS) accounts, commonly known as "add money", amid growing concerns over cyber fraud and unauthorised transactions.

Under the new rules, which will take effect from 1 August this year, customers will only be able to transfer money from a bank card to an MFS account if both are registered under the same name. Banks and MFS providers will be required to verify that the receiving MFS account belongs to the cardholder.

The central bank decided to impose the restriction following a major fraud incident involving a foreign bank operating in Bangladesh, where fraudsters transferred money from customers' cards to MFS wallets through unauthorised transactions.

Officials familiar with the matter said the Payment Systems Department of the Bangladesh Bank is expected to issue a circular on the new measures soon.

As an interim arrangement until August, customers will still be able to transfer money from one person's card to another person's MFS account. However, a token transaction of up to Tk500 must first be completed during the card-linking process.

Regular transactions will only be permitted 24 hours after the successful completion of the token transaction and linking process.

The Bangladesh Bank has also instructed MFS providers to classify card-to-MFS add money transactions as "fund transfers" rather than "merchant payments". The central bank further said the beneficiary wallet number must remain visible to the card-issuing bank during transactions.

Banks and MFS providers that fail to ensure this facility by 31 July will not be allowed to offer add money services through those cards from 1 August onwards.

According to sector insiders and central bank officials, a cybercrime group in the last week of August 2025 syphoned off nearly Tk27 lakh from at least 54 customers of Standard Chartered Bank (SCB) by bypassing one-time password protections on credit and debit cards issued by bank and transferring funds to mobile wallets such as bKash and Nagad.

Victims had reported that without their knowledge or any transaction, Tk50,000 was transferred from their cards to bKash and Nagad accounts in each instance. The money was then quickly withdrawn by the fraud group, and the MFS accounts were immediately closed.

An investigation by The Business Standard found that the fraudsters used SIM cards and MFS accounts registered under other people's names to move the stolen funds.

Following the incident, SCB suspended the add money feature from its cards to MFS platforms.

India today hiked petrol and diesel prices by nearly ninety paise per litre in the second increase in fuel rates in less than a week after state-run oil firms ended a nearly four-year freeze on rate revisions.

The increase pushed petrol prices in New Delhi to Rs 98.64 per litre from Rs 97.77, while diesel rose to Rs 91.58 from Rs 90.67.

On 15 May, petrol and diesel prices were raised by Rs 3 per litre for the first time in more than four years, as surging global crude prices following the West Asia war forced state-run fuel retailers to pass on part of their mounting losses.

Fuel rates vary across Indian states due to differences in value-added tax.

Also on 15 May, compressed natural gas (CNG) prices were raised by Rs 2 per kg in cities. This was followed by a hike in CNG prices by Re 1 a kg on 17 May.

Global crude prices have surged more than 50 per cent since US-Israeli strikes on Iran on 28 February and Tehran's retaliation, disrupting flows through the Strait of Hormuz, a key artery for global oil shipments.

Despite the surge, retail fuel rates were kept frozen at two-year-old rates as part of what the Indian government said was an effort to shield consumers from higher global energy costs.

On Monday, Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, stated that the 15 May hike had cut losses by a fourth and that oil companies were still incurring about Rs 750 crore a day in losses.

Prices have remained frozen since April 2022, except for a one-off reduction of Rs 2 a litre each on petrol and diesel in March 2024, just before Lok Sabha elections. Rates were last hiked in April 2022.

Petrol in Mumbai now costs Rs 107.59 a litre and diesel costs Rs 94.08 per litre. In Kolkata, petrol now costs Rs 109.70 per litre and diesel Rs 96.07, while in Chennai, prices increased to Rs 104.49 for petrol and Rs 96.11 for diesel.

India's retail inflation, measured by the Consumer Price Index (CPI), rose to 3.48 per cent in April this year from 3.40 per cent in March, while wholesale price inflation (WPI) surged to 8.3 per cent, a 42-month high, driven by a sharp rise in fuel and energy prices amid elevated global crude oil rates.

The benchmark indices of the Dhaka Stock Exchange (DSE) posted a slight gain today (19 May), snapping a two-session losing streak in a modest market recovery.

The gains, however, lacked conviction. Trading activity remained subdued as investor participation stayed low, with many market players continuing to exercise caution amid a weak short-term trend. Restrained buying interest prevented any broad-based rally from taking shape.

The DSEX rose 8 points to close at 5,212. The blue-chip DS30 index added 2 points to settle at 1,970, while the Shariah-based DSES index edged up 3 points to 1,059.

Advancers outnumbered decliners — 181 issues gained against 138 that fell, with 74 stocks ending unchanged. Market turnover, however, slipped 6.89% to Tk676 crore from Tk726 crore in the previous session.

In its daily market review, EBL Securities noted that the bourse traded largely flat as investors' selectively accumulated large-cap stocks, though participation remained muted amid persistent caution over near-term market momentum. Indices held in positive territory throughout the session on resilient bargain-hunting interest.

Trading volumes were also weighed down by investors trimming leveraged positions and managing liquidity ahead of upcoming festival holidays, the brokerage added.

Market indices remained firmly in positive territory, with resilient bargain-hunting interest throughout the session.

However, trading activity stayed relatively subdued amid sustained cautious sentiment, while paring back exposure from leveraged positions and liquidity considerations ahead of upcoming festival holidays also somewhat weighed on the market's overall turnover.

On the sectoral front, Pharmaceuticals led turnover with a 16.9% share, followed by General Insurance at 13.6% and Banking at 11.4%. Among sector performances, Ceramic and Jute each rose 1.9%, and Services gained 1.3%. On the downside, Mutual Funds fell 0.8%, Food declined 0.6%, and Life Insurance dropped 0.5%.

At the Chattogram Stock Exchange (CSE), the market also closed in the green. The Selective Categories' Index (CSCX) gained 23.0 points, while the All Share Price Index (CASPI) rose 31.1 points.

British American Tobacco Bangladesh recorded a 14 percent year-on-year decline in domestic cigarette sales volume in the first quarter of FY2025-26, as tax-driven affordability pressures, downtrading, and competition from illicit cigarettes weighed on sales, according to an earnings update by BRAC EPL Stock Brokerage Ltd.

Domestic gross revenue fell 10.7 percent year-on-year, while net revenue dropped 21 percent as the total tax burden rose to 84.1 percent from 82 percent in the same quarter last year.

A modest 3.8 percent growth in unit revenue failed to offset the combined drag of lower volumes and higher taxes.

The Bangladesh Cigarette Manufacturers’ Association estimates that illicit cigarettes now account for 15 to 18 percent of the total market, posing a structural challenge for compliant manufacturers.

Non-core revenue offered little relief. Cigarette exports remained zero for the third consecutive quarter, while leaf export revenue fell 22.5 percent year-on-year due to a 27.1 percent decline in volume, partly offset by a 6.3 percent rise in unit price.

Revenue from third-party contract manufacturing -- now in its second quarter -- plunged 68 percent quarter-on-quarter, while no revenue was generated from semi-finished goods.

Gross profit fell 12 percent year-on-year to Tk 802 crore, although gross margin expanded by 707 basis points to 56 percent as cost of sales dropped 33.8 percent year-on-year, outpacing the 23.1 percent decline in total net revenue.

BATBC did not explain the margin improvement, which likely reflected price-mix benefits, input cost normalisation, and efficiency gains from consolidated production.

Operating expenses surged 40.7 percent year-on-year despite the revenue contraction, with no explanation offered. Salaries, IT costs, and technical assistance fees are the principal expense heads, according to the company’s 2025 annual report.

Net finance expenses eased to Tk 49.2 crore from Tk 53.9 crore a year earlier, mainly due to lower lease costs.

Total interest-bearing debt rose sharply to Tk 2,381 crore at the end of March from Tk 1,489 crore in December.

Operating cash outflow widened to Tk 1,226 crore from Tk 952 crore a year earlier, driven by lower profitability and inventory build-up.

Inventories climbed to Tk 5,386 crore from Tk 3,829 crore at year-end, prompting the company to increase short-term borrowing to manage operations.

The US dollar rose on Tuesday as investors balanced cautious hopes ​for a Middle East peace deal against concerns that the Federal Reserve could raise rates to curb energy-driven inflation.

US ‌President Donald Trump said on Monday there was now a “very good chance” of reaching a deal limiting Iran’s nuclear program.

The dollar jumped in March after Iran’s effective closure of the Strait of Hormuz pushed oil prices higher, weighing on oil-dependent economies such as Japan and the euro area ​while increasing safe-haven demand for the greenback.

Oil prices fell 2 percent on Tuesday after Trump’s remarks.

“There are reasons why the ​dollar has not strengthened back to the levels seen in March,” Paul Mackel, global head of forex research at HSBC, said.

“Notably, global risk sentiment has recovered strongly; tension remains in USD OIS (overnight index swaps) markets which ​have stopped short of pricing an aggressive Fed hiking cycle; and monthly global growth momentum is still positive,” he added.

At the ​same time, investors are now pricing in almost a 48.5 percent chance that the Fed could raise rates in December, and a 98.8 percent chance it maintains current rates at its next meeting in June, according to the CME FedWatch tool.

“Even if the Fed moves to signal that it ​will adopt a neutral bias in June, it may not be enough to stabilize inflation expectations and long-term US Treasury yields,” ​said Thierry Wizman, Macquarie Group’s global foreign exchange and rates strategist.

“An opportunity to change the Fed’s rhetoric decidedly toward ‘hawkish’ will come with the ‌small ⁠flurry of Fed speeches, between now and June 6,” he added.

The US dollar index , which measures the greenback’s strength against a basket of six currencies, was up 0.2 percent at 99.18, after snapping a five-day winning streak on Monday as fears eased of an escalation in the war.

Gold prices fell on Tuesday, but ‌stayed above a 1-1/2-month low hit in the last session, as markets consolidated while awaiting further developments after US President Donald Trump paused a planned attack against Iran.

Spot gold fell ​0.5 percent to $4,544.17 per ounce by 0820 GMT.

US gold futures for June delivery ​lost 0.2 percent to $4,547.70.

Gold prices fell 2.4 percent on Friday in their biggest one-day decline since March 26 and extended losses on Monday to touch $4,479.54, the lowest ​level since March 30, as mounting inflation fears triggered a rout in the global ​bond market. Bullion recovered to close Monday slightly higher.

“It seems like an oscillation in this kind of inflation fear trade and a sort of digestion of the fireworks from Friday,” ​said Ilya Spivak, head of global macro at Tastylive, adding that markets are ​now awaiting broad sentiment markers such as the minutes of April’s FOMC meeting to be ‌released on Wednesday.

Bonds steadied following a steep selloff after Trump said on Monday he had paused a planned attack against Iran to allow for negotiations to take place on a deal to end the US-Israeli war, after Iran sent a new peace ​proposal to Washington.

Oil ​prices fell more ⁠than 2 percent, easing some inflation fears. Gold is considered a hedge against inflation, though higher interest rates tend to weigh ​on the non-yielding metal.

Kevin Warsh will be sworn in as ​Fed chair ⁠on Friday by Trump, a White House official said on Monday, putting the financier at the helm of the central bank as it grapples with intensifying inflation that ⁠may ​make it hard to push through the interest-rate ​cuts Trump desires.

Bangladesh Bank (BB) will not intervene in the dollar exchange rate in the near term, with the currency instead expected to be determined by market supply and demand, the central bank governor told treasury heads of banks at a meeting today (19 May).

A senior Bangladesh Bank official, who attended the meeting, confirmed the development to The Business Standard, saying the governor sought a clearer understanding of foreign exchange market operations and listened to bankers' concerns over current dynamics.

According to the official, the governor informed bankers that the central bank would no longer dictate the foreign exchange market and that exchange rates would be allowed to adjust based on supply and demand conditions.
=

He also said the regulator is working towards a more market-based foreign exchange regime. At the same time, the governor cautioned banks against any attempts to manipulate the dollar market.

However, a deputy managing director (DMD) of a private commercial bank told TBS that Bangladesh Bank had intervened in the foreign exchange market between March and April this year.

He alleged that during that period, central bank officials contacted banks and informally indicated a ceiling for dollar exchange rates.

The country's private sector credit growth fell to a historic low of 4.72% in March this year, reflecting weak business confidence, slowing investment and mounting uncertainty in the economy.

Economists and bankers said political uncertainty eased somewhat after the February election, but the deeper problems discouraging investment and new business activity remain unresolved.

In addition, the fuel crisis emerged as another contributing factor in March, leading to a sharp slowdown in bank lending growth compared with previous levels, they said.

Private sector credit growth had been declining steadily in recent months, falling from 6.58% in November 2025 to 6.20% in December, and then to 6.03% in both January and February 2026, before dropping sharply in March, central bank sources confirmed.

Outstanding loans to the private sector stood at Tk23.35 lakh crore in March 2026, according to Bangladesh Bank data.

Speaking to The Business Standard, Mustafizur Rahman, distinguished fellow at Centre for Policy Dialogue, said, "The major trend indicates that it is not increasing. Both necessary and sufficient factors are at work here."

"The necessary factor is political stability, which has improved somewhat after the election. But the sufficient factors – such as the cost of doing business, inflation, logistics policies and several other issues – have not seen any major changes."

He said the energy crisis added further pressure in March. "These problems already existed, and energy became an additional challenge. Inflation, the cost of doing business and other factors have created uncertainty," he added.

The Bangladesh Bank has been publishing private sector credit growth data since 2003. A review of the data shows March recorded the lowest growth in the past 24 years.

A deputy managing director of a private bank told TBS that many businesses shut down after the fall of the Awami League government, while others are operating far below capacity.

He said several factories owned by large business groups, including Nassa Group, Beximco Group and Gazi Group, had closed, reducing demand for bank borrowing. "When factories were operational, they imported capital machinery. But even the firms still running have reduced production by 60-70%," he said.

Bankers question BB's policy direction

Several managing directors of private banks told TBS they remain unclear about the central bank's policy direction in dealing with the current economic challenges.

Bankers said lending decisions depend heavily on broader policy clarity, including interest rates, exchange rates and inflation trends. They explained that when businesses seek loans for new investments or ventures, banks assess the overall policy environment, borrowing costs and the likely movement of the US dollar before approving financing.

One private bank managing director said the governor had spoken about lowering lending rates, but questioned how feasible that would be at a time of high inflation.

He also criticised Bangladesh Bank for holding the dollar exchange rate at Tk122.75 despite pressure on the local currency. Another MD said the central bank's decision to cap trade finance interest rates at 3% during a crisis period had created concerns.

He noted that the cost of foreign borrowing currently stands at SOFR plus 2.5%, while the additional cap on UPAS financing – a foreign currency-based import financing system – would further limit financing opportunities.

"If financing through UPAS becomes difficult, banks will have to lend in local currency at interest rates of 12-13%. The central bank believes this will increase credit growth, which is why rates on trade finance have been lowered. But this decision is not correct – it is a mistake," he said.

Another bank MD said businesses and banks remained uncertain about the central bank's main priority – whether it was controlling inflation, lowering interest rates or boosting GDP growth.

"There were expectations that many new projects would emerge after the election, but that has not happened," he said.

He added that the government's heavy borrowing from banks because of a revenue shortfall could further increase interest rates and crowd out private sector borrowers. "There is also uncertainty over where the exchange rate will stand in the next six months," he said.

Another bank MD said many large corporate firms had sought policy support from the central bank, signalling financial distress. "When companies need policy support, banks become less willing to finance them. It also becomes very difficult for those firms to make new investments or expand business operations," he said.

Banks shift towards government securities

With demand for private sector loans weakening, banks have increasingly turned to treasury bills and bonds for income.

A senior official at a private bank said lenders were moving towards safer government securities amid weak private investment.

At the same time, the government has been borrowing heavily from banks through treasury bills and bonds, including an additional Tk10,000 crore outside the regular borrowing calendar during the October-December quarter.

Limited opportunities for private investment have allowed banks to earn nearly 11% interest on what are effectively risk-free government securities. For many conventional banks, a growing share of income now comes from this segment.

Despite concerns at the start of 2025 over rising deposit rates, high inflation, political uncertainty and weak loan demand, stronger private banks have posted higher profits largely through earnings from government securities rather than loan expansion.

Bangladesh Bank data showed the government collected Tk33,000 crore through treasury bills in March this year. In April, the amount rose 39% month-on-month to Tk46,000 crore.

Of that amount, Tk32,800 crore was used to repay liabilities from previously issued treasury bills, leaving the government's net borrowing through treasury bills at Tk13,200 crore in April.

Listed companies in Bangladesh may soon have to overhaul their boards under rules that would limit independent director tenures, bar executives from holding dual roles and give the securities regulator direct power to remove directors.
The changes have been proposed in the draft “Bangladesh Securities and Exchange Commission (Corporate Governance) Rules, 2026” published by the commission for stakeholder feedback recently.
The draft, open for comments until May 31, would replace the existing corporate governance code with a more comprehensive rule-based framework, tightening oversight over board composition, executive appointments, subsidiary operations and documentation requirements.

INDEPENDENT DIRECTORS
Some of the major proposed changes relate to independent directors.

The draft states that an independent director can serve a maximum of two consecutive three-year terms, after which a three-year gap is required before reappointment.

The post of independent directors cannot remain vacant for more than 90 days, it also states.

The BSEC has also proposed giving itself direct authority to directly remove independent directors found to pose “a risk to the future of the company.”

The commission may make a pool of eligible candidates for independent director positions, with remuneration governed by board-approved policy and specified in appointment letters, according to the draft.

Independent directors must have at least 12 years of cumulative experience across business, corporate, government offices, academic or professional fields. However, female independent directors would need at least eight years.

BOARD AND TOP MANAGEMENT

The draft rules require that boards include at least one female director – a directive the BSEC has been pushing for years.

In a bid to strengthen separation of powers, the proposed rules mandate that the chairman and managing director or CEO must be different individuals .The chairman must also be elected from among non-executive directors.

Any director of a stock exchange, depository, central counterparty, stockbroker, stock dealer or merchant banker — except an independent director representing a holding company — would be ineligible to serve on the board of a listed company.

Under the proposed rules, a CEO or managing director of a listed company cannot simultaneously hold the same position at another listed company.

The posts of CEO, company secretary, chief financial officer (CFO) and head of internal audit and compliance must each be held by separate individuals. In addition, none of them can hold executive positions at another company concurrently, though the commission may allow CFOs or company secretaries to serve within group companies under certain conditions.

The draft rules also state that no top executive can be removed without board approval and immediate disclosure to the commission and stock exchanges.

AUDIT COMMITTEE AND GOVERNANCE

The audit committee must meet at least four times a year and include at least one financially literate independent director with a minimum of 10 years of accounting or financial management experience.

The BSEC has further proposed stronger documentation requirements for board and shareholder meetings.

The draft rules state that companies must preserve board and shareholder meeting minutes permanently, record online participation details and formally document dissenting opinions. Directors whose objections are not recorded in minutes can file complaints with the commission within 30 days.

All listed companies must arrange governance programmes for directors within one year of the rules taking effect. Newly appointed directors may also be required to complete certification programmes from institutions recognised by the commission.

The new rules will apply to all companies with ordinary shares listed on the main board, the SME board and alternative trading board of the stock exchanges, as well as any public interest entity.

SUBSIDIARIES

The rules propose tighter oversight of subsidiary companies as well.

At least one independent director from the holding company — preferably the chairman of the audit committee — would have to sit on the board of the subsidiary company.

Holding company boards and audit committees would also be required to review subsidiary affairs, investments and inter-company transactions.

The regulator will review the feedback before finalising the framework.

In Bangladesh today, the greatest struggle for ordinary citizens is no longer political uncertainty; it is economic survival. For millions of families, the daily challenge is not debating national issues but simply affording basic necessities. A visit to any local market reveals the reality: middle-income families are cutting back on groceries, while low-income households are struggling to afford even the most essential items.

At such a critical moment, the proposal by the National Board of Revenue (NBR) to increase the source tax on essential commodities from 0.5 percent to 1 percent raises serious concerns. The proposed tax hike would affect key everyday goods such as rice, pulses, edible oil, and fruits. While the increase may appear marginal on paper, its consequences in Bangladesh’s fragile market structure could be far-reaching.

In theory, a 0.5 percent increase may seem insignificant. In practice, however, additional taxation rarely remains confined to importers or wholesalers. Importers pass the extra cost on to wholesalers, wholesalers shift the burden to retailers, and retailers ultimately transfer it to consumers. In economic terms, this is known as cost pass-through, and in Bangladesh, the final burden almost always falls on ordinary citizens — basically, the final consumers.

At a time when inflation continues to erode purchasing power, such a move risks deepening public hardship. Inflation in Bangladesh is no longer an abstract economic indicator; it is a harsh daily reality. Families that once managed their monthly budgets comfortably are now forced to cut spending before the month ends. Many households have reduced their consumption of fish, meat, and fruits, while others are struggling to maintain basic nutrition.

The most troubling aspect of this proposed tax increase is that it targets essential goods — items people cannot simply stop buying. Rice, pulses, and cooking oil are not luxury products; they are necessities. Economists describe these products as having “inelastic demand,” meaning consumers must continue purchasing them even when prices rise. As a result, higher taxes on these items disproportionately hurt lower- and middle-income families.

Such decisions not only create economic pressure but also carry political repercussions because ordinary people determine a large part of their satisfaction or dissatisfaction with the government based on their everyday experiences. When people see that their incomes are not increasing but their daily expenses are rising, questions about the government’s economic management naturally emerge.

History has repeatedly shown that prolonged increases in living costs create widespread social stress and public dissatisfaction. It has been observed in various countries that a prolonged rise in commodity prices creates stress in the daily lives of ordinary people and increases expectations from the government.

In Bangladesh too, people naturally want the government to play an effective role in controlling the market situation and keeping the prices of essential commodities at a tolerable level. Therefore, it is important to consider the purchasing power of the general public and the overall market reality when making such decisions in the current situation. Timely and people-friendly measures can strengthen public trust in the government.

This expectation becomes even more significant considering the government’s repeated commitments to building a just, humane, and prosperous Bangladesh — often referred to as “Bangladesh First” — by reducing poverty, strengthening social protection, and improving living standards. Election promises emphasized lowering the cost of living and creating a more efficient market system. Yet imposing additional taxes on basic necessities appears inconsistent with those commitments.

Certainly, taxation remains essential for any government. Revenue is needed to fund infrastructure, education, healthcare, and social welfare programmes. However, an important question must be asked: should revenue generation come at the expense of ordinary people’s kitchens?

Bangladesh has long faced allegations of large-scale tax evasion, loan defaults, illicit financial outflows, and administrative inefficiencies involving billions of taka. If the government chooses to increase taxes on basic goods without taking stronger action against major tax evaders and financial irregularities, it risks reinforcing public perceptions of inequality and unfairness.

Consumer confidence remains a critical driver of economic growth. When households have less disposable income, demand declines, small businesses suffer, and economic activity slows. While taxing essential goods may generate short-term revenue, it could create long-term economic and political costs.

The responsibility of a government extends far beyond revenue collection; it must also safeguard the welfare and dignity of its citizens. At a time when many families are already struggling with rising living costs, imposing additional financial burdens through higher taxes on essential commodities is both economically questionable and socially insensitive.

Instead, policymakers should prioritize broadening the tax base, curbing wasteful public expenditures, addressing tax evasion, and strengthening market regulation to ensure greater efficiency and fairness in revenue generation.

The success of a government should not be assessed solely through large-scale infrastructure projects or ambitious development agendas. It must also be measured by its ability to reduce the everyday hardships faced by ordinary citizens. The proposed increase in source tax on essential goods is not merely a fiscal measure; it carries significant implications for household affordability, market stability, and public confidence in government policies.

Given Bangladesh’s current economic challenges, the need of the hour is to identify alternative revenue streams and implement meaningful reforms in market governance without placing further pressure on low- and middle-income households. Development, in its truest sense, should improve the quality of life for citizens, not make it more difficult.

Rather than strengthening the capital market, the government is playing its habitual game of relying on banks for business financing.

This is evident in the central bank's latest decision to expand the single borrower exposure limit from 15 per cent to 25 per cent of a bank's capital.

The suspension of the effectiveness of the previous 15 per cent limit until June 2028 is feared to discourage new listings of companies from large conglomerates.

"The expansion of the exposure limit is a repetition of the same mistake that led to a systematic damage to the financial ecosystem," said Md. Ashequr Rahman, managing director of Midway Securities.

Long-term financing through banks has continued over the years against short-term deposits, which has proved to be disastrous for the banking sector after a substantial amount of loans turned sour.

Before the last national election, key representatives of the BNP said they, if voted to power, would prioritise the capital market instead of the money market in financing.

In November last year, BNP leader Amir Khosru Mahmud Chowdhury, the incumbent finance minister, said at the Bangladesh Economic Summit that the party would put emphasis on energizing the capital market to lessen pressure on banks.Bangladesh travel guide

"We don't want to go to banks that are overused. We want to make the capital market vibrant and we're very serious about it," said Mr Chowdhury at the time.

The ruling party's election manifesto also included plans for the development of the capital market.

"All political parties spoke about a free economy, but eventually they preferred a managed economy after assuming office," said Mr Rahman while speaking with The FE over the phone on the latest policy of the Bangladesh Bank.

The change has been brought apparently to ease financial stress of the borrowers amid economic volatility.

With the high non-performing loan (NPL) ratio, however, the banks will face mounting pressure.

The overall banking sector's NPL ratio stood at over 30 per cent in December last year and deposits grew at a rate of 11.28 per cent year-on-year in February this year.

The deposit growth has not created enough room for fresh lending.

A lender having a 30 per cent NPL ratio means it has to serve purposes worth Tk 100 by Tk 70.

On receipt of fresh deposits worth Tk 11.28, the bank will be able to do the same job with Tk 81.28. Still, there is a shortfall of Tk 18.72. Besides, fresh deposits come with fresh interest liability.Global economy overview

The bank would have been in a better situation in terms of liquidity and for fresh lending had the deposit growth been at least equivalent to the NPL ratio.

In a situation like this, the expansion of the single borrower's exposure limit is not conducive to creating a healthy financial ecosystem.

Mr Rahman, of Midway Securities, said the BB decision is aimed at easing financial stress of business groups but they will borrow money from banks to execute long-term plans. "Will the central bank be able to restore the previous 15 per cent limit after two years?"

In the pre-budget meeting held between the National Board of Revenue (NBR) and stakeholders of the capital market, it was discussed that the companies that would exhaust a certain limit of credit must go to the capital market to raise more capital and that money could be raised through both equity and debt instruments.

After the promise of prioritising the capital market by the government and subsequent discussions in this regard with the revenue board, the central bank expanded the single borrower exposure limit.

Stakeholders of the capital market said both the securities regulator and the central bank are regulatory bodies. But the central bank enjoys the authority to take decisions without consulting other regulators.

On the other hand, since its inception in 1993, the Bangladesh Securities and Exchange Commission (BSEC) has failed to establish its importance before the government and other regulatory bodies.

Alongside the failure of the BSEC, stock exchanges and professional bodies of the capital market have also been unable to play any role in bringing good companies, which heavily rely on bank financing, to the secondary market.

The government is considering the introduction of a refund mechanism for excess minimum tax paid by companies if the amount cannot be adjusted against future profits within a specified period – a move aimed at improving tax fairness and easing a major concern among domestic and foreign investors.

Officials at the National Board of Revenue told The Business Standard that the proposal, likely to be included in the upcoming national budget, would allow business entities to claim refunds of excess minimum tax after three years if they fail to offset the amount against future taxable income.

A senior NBR official, speaking on condition of anonymity, said, "We have long felt that a non-refundable minimum tax system conflicts with international standards and the principles of tax justice. The upcoming budget will contain a positive development in this regard."

Another official said companies would become eligible for such refunds after a set timeframe, which is currently being considered at three years.

"The refund process will be handled through an automated faceless system. Representatives of companies will not need to visit tax offices. Refunds will be automatically credited to their bank accounts," the official added.

Officials also said the NBR plans to strengthen compliance systems and data integration before implementing the refund mechanism to prevent abuse by non-compliant taxpayers.

Welcoming the move, business leaders and tax experts said the proposed reform could significantly improve Bangladesh's investment climate by reducing capital erosion caused by turnover-based taxation.

Under the existing system, companies are required to pay minimum tax based on turnover or gross receipts, regardless of whether they make a profit or incur losses. Businesses have long argued that the inability to recover excess minimum tax has sharply increased their effective tax burden, despite reductions in statutory corporate tax rates in recent years.

Bangladesh currently has around 3 crore registered business entities, although only about 30,000 submit tax returns, according to NBR officials. Minimum tax rates on company turnover range from 1% to 3.5%, while more than 30 other categories of taxpayers are also subject to minimum tax on gross receipts, with rates reaching as high as 20%.

Last year's budget allowed companies to carry forward excess minimum tax for adjustment against future tax liabilities. However, businesses argued that the provision offered little practical relief for firms facing prolonged losses or persistently low profit margins.

Concerns over effective tax burden

Corporate tax rates in Bangladesh have been reduced by nearly 10 percentage points over the past several years. Non-listed companies currently pay 27.5% corporate tax, while listed firms pay between 22.5% and 25%.

Despite these cuts, business groups have argued that high minimum taxes and the absence of refunds have pushed effective tax rates to nearly 50% in some cases.

Minimum tax was first introduced in Bangladesh in the fiscal 2012-13 to address widespread tax evasion among companies that repeatedly declared losses. NBR officials said about 60% of the income tax currently collected is collected as minimum tax.

Former NBR member for income tax policy Syed Md Aminul Karim said the system was originally introduced because the tax authority lacked the capacity to detect profit concealment effectively.

"Many companies used to show losses year after year to evade taxes. Since it was difficult for the NBR to uncover such evasion, the minimum tax system was introduced. However, compliant companies ended up suffering," he said.

Why businesses oppose minimum tax

Under the current regime, businesses must pay tax based on turnover even if their actual taxable income is lower.

For example, if a company pays Tk1 crore in minimum tax at a 2% turnover tax rate, but its final profit-based tax liability is only Tk70 lakh, the excess Tk30 lakh is not refunded under the existing system. As a result, the company's effective tax burden rises above the statutory corporate tax rate.

The problem becomes more severe for companies incurring losses as they are still required to pay minimum tax despite having no taxable income.

Mobile phone operator Robi Axiata said it has paid around Tk1,000 crore more in minimum tax than its actual tax liability over the years. Although the company has recently returned to stronger profitability, allowing it to offset excess taxes, Banglalink, another mobile phone operator, continues to face losses while remaining subject to minimum tax obligations.

The issue has been repeatedly raised by business organisations, including the Foreign Investors' Chamber of Commerce and Industry and the Metropolitan Chamber of Commerce and Industry.

Shahed Alam, chief corporate and regulatory officer of Robi Axiata, said turnover tax remains a major obstacle to business growth.

He added that the turnover tax imposes tax on gross revenue without considering whether a company is profitable or loss-making, making the system inconsistent with the principles of fair taxation.

Taimur Rahman, chief corporate and regulatory affairs officer of Banglalink, said, "Banglalink has been subject to minimum tax since FY2015 and, up to FY2024, the company has paid approximately Tk938.90 crore under the minimum tax regime. Since these taxes were paid despite the absence of taxable profits, the minimum tax mechanism has had a significant impact on the company's cash flow and investment capacity."

Wide coverage of minimum tax regime

Under the current Income Tax Act, mobile phone operators are subject to a 1.5% minimum tax on annual turnover. Manufacturers of carbonated beverages, sugary products and tobacco products face a 3% rate, while most other companies pay 1%.

Individuals with annual gross receipts exceeding Tk3 crore are also subject to a 1% minimum tax.

Exporters are required to pay 1% tax on export proceeds, while at least 32 withholding tax provisions are also treated as minimum tax, meaning taxpayers cannot reclaim excess deductions even if their final tax liability is lower.

Experts welcome proposed reform

SK Zami Chowdhury, managing partner of chartered accountancy firm Chowdhury Emdad and Company, said the proposed refund mechanism would help establish greater tax fairness.

"However, the authorities must first ensure that loopholes for tax evasion are properly addressed before implementing the refund system," he said.

Syed Md Aminul Karim said taxing businesses without income contradicts the fundamental philosophy of taxation.

"Introducing a refund system would be a positive and necessary step," he added.

Welcoming the reform initiative, Banglalink's Taimur Rahman said, "The proposed refund mechanism for unadjusted minimum tax is a positive and constructive step, which would help reduce long-term financial pressure on businesses operating in challenging market conditions."