VAT-BIN Net Extends to the Grassroots

From grocery shops to small-scale industries—everyone will have to enter the VAT net right from the start. This is because obtaining a Business Identification Number (BIN) will be mandatory in the upcoming fiscal year. Consequently, small traders will automatically fall under the purview of VAT.

Currently, such new entrepreneurs do not need a BIN to obtain a trade license or open a current account with a bank. Through this measure, a target has been set in the upcoming budget to collect an additional 600 crore taka in revenue from the small and medium enterprise (SME) sector. Additionally, tax at source is being doubled to boost revenue. The existing surcharge will be abolished and replaced by a wealth tax. However, the housing sector might retain the opportunity to whiten undisclosed money. On the other hand, there are plans to withdraw the advance tax (AT) on the import of kidney dialysis equipment. Alongside this, no new taxes are being imposed on the import of daily commodities.

Furthermore, dependence on bank and foreign loans is increasing to meet the massive deficit in the upcoming budget. The deficit is estimated at 2 lakh 43 thousand crore taka including grants, and 2 lakh 38 thousand crore taka excluding grants. The total potential expenditure is sized at 9 lakh 38 thousand crore taka, which is 1.5 lakh crore taka higher than the current revised budget. The total revenue target is set at 6 lakh 95 thousand crore taka. The draft budget for the 2026-27 fiscal year was recently approved at a meeting of the government's Economic Coordination Council.

The new government is set to present its first budget amidst numerous adversities, including the war in the Middle East, global economic recession, volatility in fuel oil prices, high inflation, a hollowed-out banking sector, and high levels of defaulted loans. Under the prevailing circumstances, the government will have to bear a massive burden of subsidies.

According to economists, the upcoming budget is not merely a financial document for the new government, but is becoming its first political test of economic capability, where it must also keep voter satisfaction in mind.

Finance Minister Amir Khosru Mahmud Chowdhury said they are heading towards a large budget to foster economic recovery by increasing investment and expenditure. In his view, poverty alleviation, infrastructure development, and employment generation are impossible without a large budget. He himself is anxious that if the economy cannot be lifted from its current state, stagnation will increase further.

To manage the large-scale expenditures, a tax revenue collection target of 6 lakh 29 thousand crore taka has been set for the upcoming fiscal year, which is 1 lakh 6 thousand crore taka higher than the current revised tax revenue. Out of this, the NBR will collect 6 lakh 4 thousand crore taka in taxes.
Tax at Source on Export Cash Incentives May Rise to 20%

To boost revenue collection, the tax at source on export cash incentives may be increased from 10% to 20%. This potential move comes despite a long-standing demand from exporters to withdraw the existing 10% source tax altogether. Furthermore, to ensure honest taxpayers do not face discrimination, a slightly higher rate than the regular tax rate might be imposed on whitening undisclosed money.

The government is trying to minimize price pressures on low- and middle-income groups by refraining from increasing taxes on daily commodities. To lower treatment costs for kidney patients, the government is considering the withdrawal of the 7.5% Advance Tax (AT) imposed on the import of dialysis equipment. Currently, the total tax rate on kidney dialysis machines stands at 22.5%, which includes 15% VAT and 7.5% AT.

Introduction of 'Wealth Tax' to Replace Surcharge

To reduce income inequality, the existing surcharge system may be abolished and replaced by a "Wealth Tax." Officials consider this initiative a major structural shift in taxing the wealthy. Under the proposed structure:
Up to 4 crore taka: Tax-free
Next 2 crore taka: 0.25% tax rate
Next 5 crore taka: 0.50% tax rate
Next 5 crore taka: 0.75% tax rate
Remaining assets above this threshold: 1% tax rate
Meanwhile, several officials from the National Board of Revenue (NBR) have expressed deep skepticism about achieving this ambitious revenue target, especially given the consistent failure to meet targets over the past few years. However, the Finance Division believes collection will rise in the upcoming fiscal year due to various reform initiatives. These include mandatory online return submission for all individual taxpayers, mandatory use of the income tax return system, and ensured data sharing with the income tax department.

Digital Reforms and IMF Conditions

During the Coordination Council meeting, Finance Secretary Dr. Md. Khairuzzaman Mozumder stated that a project titled "Strengthening Internal Revenue Collection"—financed by the World Bank at a cost of approximately 1,000 crore taka—has been adopted to bring NBR operations fully onto digital platforms. According to him, initiatives for NBR expansion and institutional reform have been undertaken. To boost VAT collection:

The turnover VAT enlistment threshold is being reduced from 50 lakh taka to 30 lakh taka.

The registration threshold is being lowered from 3 crore taka to 50 lakh taka.

Areas of revenue evasion have been identified, and the existing VAT collection structure has been rationalized.

Additionally, based on the report of a task force formed to formulate and implement specific short-term action plans, he expects revenue collection to grow in the future. Despite stringent International Monetary Fund (IMF) conditions, this deficit budget is being kept within 5% of GDP. To finance the deficit, the government plans to borrow 1,08,000 crore taka from banks, 1,11,000 crore taka via foreign loans, and secure 5,000 crore taka in grants.

The Burden on the Banking Sector

According to stakeholders, the foundation of the banking sector is weakening due to long-standing irregularities, a 30% default loan rate, weak supervision, and political influence. Yet, the government is relying heavily on it, setting a bank borrowing target of 1,08,000 crore taka. The government's massive borrowing from banks could leave a negative impact on the private sector.

Former Senior Finance Secretary Mahbub Ahmed commented that the "new budget will not be able to spend the full amount of the potential expenditure." Speaking about the upcoming period, he stated, "By the end of the year, actual expenditure will be much lower because there are limitations in spending capacity. However, while trying to spend, earning money—meaning revenue collection—will be difficult." This could cause the borrowing target to swell even further. Under the prevailing circumstances, he believes this massive budget is unrealistic.

Subsidy Allocations for Power, Energy, and Food Has Been Planned As Follows
The budget for the 2026-27 fiscal year allocates:
37,000 crore taka for subsidies in the power sector
6,500 crore taka for gas
27,000 crore taka for fertilizer

Considering the global situation arising from ongoing tensions in the Middle East, the Finance Division believes additional allocations may be required for power, gas, and fertilizer subsidies.

Furthermore, a total of 1,600 crore taka has been estimated for food subsidies, keeping in mind that low-income relief programs like OMS, TCB, and food-friendly initiatives may run year-round. Additional allocations will also be required to implement the "Family Card" and "Farmer's Card" programs in line with the current government's priority sectors.

Government Allocation for Interest Payments Stands at 1,27,500 Crore Taka

In the 2024-25 fiscal year, the government's allocation for interest payments was 1,21,500 crore taka, which accounted for 2.03% of GDP. However, the actual expenditure escalated to 1,36,123 crore taka (2.50% of GDP), consuming approximately 21.5% of the total budget. For the 2026-27 fiscal year, the estimated allocation for interest payments has been set at 1,27,500 crore taka, representing 1.87% of GDP.

Meanwhile, the Asian Development Bank (ADB) has forecasted that inflation will rise further due to the fuel crisis triggered by ongoing conflicts in the Middle East. The impacts are already being felt in Bangladesh. Consequently, although the current target stands at 7%, the inflation target for the upcoming fiscal year has been revised upward to 7.5%.

Growth Target Set at 6.5% Amid Structural Challenges

The implementation of contractionary monetary and fiscal policies over the last few years to control inflation has reduced aggregate demand, hitting GDP growth for three consecutive years. Despite this, the Finance Minister remains optimistic and aims for a 6.5% growth target in the new national budget, compared to the current fiscal year's revised growth target of 5%.

To drive this growth, the government has set investment targets of: 23,542 crore taka in the public sector and Tk14,570 crore in the private sector

However, stagnation in investment persists under the current circumstances. Experts note that political stability and a favorable environment are crucial to attracting these investments. Analysts also observe that while contractionary monetary policy has lowered investment and demand in the economy, the government is simultaneously attempting a strategy to pull up growth by increasing expenditure.

Key Priorities of the Upcoming Budget

The upcoming budget focuses on controlling rising inflation, maintaining macroeconomic stability, and restoring discipline through financial sector restructuring. Key priority areas include:
Implementing the ruling party's election manifesto commitments, supporting the agricultural sector to ensure food security, selecting viable, correct projects for development, ensuring healthcare access for all citizens, eliminating barriers to improve the investment climate, achieving Sustainable Development Goals (SDGs) to tackle climate change impacts and restoring a high-growth trajectory to eventually reach a $1 trillion economy. Additionally, the Finance Minister plans to bring sectors that currently remain outside the mainstream economy into the fold. Major emphasis is being placed on developing the creative economy—including the film industry, music industry, sports, and rural culture—with the expectation that comprehensive support for these sectors will yield positive economic returns.