Excessive reliance on indirect taxes pushing up inflation: Speakers

Tuesday, May 19, 2026

Experts highlighted that Bangladesh’s heavy dependence on indirect taxes, especially VAT which accounts for nearly 80% of tax revenue, is driving inflation and straining household incomes. They urged the government to reform the tax system by lowering VAT rates and increasing direct taxes to foster economic equity and control rising prices.

Experts have raised concerns over Bangladesh’s heavy reliance on indirect taxes, particularly value-added tax (VAT), as a key factor contributing to rising inflation and economic challenges. During a seminar held in Dhaka on May 19, 2026, speakers underscored that the government’s predominant dependence on indirect taxes—primarily VAT—exerts considerable upward pressure on prices and affects household incomes.

According to the panel, VAT constitutes nearly 80% of the total tax revenue collected by the Bangladeshi government, highlighting the extent to which indirect taxation dominates the country’s fiscal framework. Several experts pointed to studies and statistical analyses indicating that the increased VAT rates and the broader tax burden imposed through indirect taxation have significantly fueled inflationary trends.

The speakers criticized the existing tax structure for lacking transparency and failing to foster comprehensive economic reforms. They argued that excessive reliance on indirect taxes undermines equitable growth and compromises the government’s ability to implement policies that could mitigate inflation while supporting vulnerable populations.

In response, the panelists called for a restructuring of the tax system, urging the government to reduce the VAT rate and shift toward greater use of direct taxes. They emphasized that such fiscal reforms are necessary to control inflation effectively and promote a more balanced and sustainable economic environment.

The seminar highlighted the broader economic implications of current tax policies, with experts advocating for concerted efforts to enhance fiscal equity. They recommended that the government prioritize reform measures that ensure transparency, increase direct tax collection, and address the inflationary impact of existing indirect tax dependence.

As Bangladesh grapples with inflationary pressures, these discussions reflect ongoing debates about the best path forward for achieving equitable economic growth and fiscal stability within the country’s evolving fiscal landscape.