The recent hike in Value Added Tax (VAT) on agro-processed food items, including biscuits, is sparking fears about its potential toll on nutrition and livelihoods in Bangladesh. The VAT has surged from 5% to 15% as stipulated by the "Value Added Tax and Supplementary Duty (Amendment) Ordinance, 2025," which come February 2025, threatens to make staple snacks unaffordable for many, especially low-income families who rely on them as key sources of nutrition.
Biscuits, often sold at Tk 5, have long been more than just a treat for the youth; they are a fundamental energy source for school-going children and vulnerable communities. With the impending VAT increase, manufacturers will be compelled to raise prices or cut production, jeopardizing the livelihoods of many and worsening food insecurity. This particularly impacts children and students who depend on these affordable snacks to stay energized throughout their schooling.
The increased tax burden falls heavily on families already struggling amid rising living costs and inflation, potentially contributing to heightened malnutrition rates and food scarcity. This effect will likely ripple throughout the economy, exacerbated by the current high inflation rates, and create significant challenges for both the poor and the middle class.
A grave concern raised by industry experts is the economic and social fallout of this tax policy. The biscuit and agro-processing industries have long been considered pivotal for economic growth and employment, providing jobs to over 250,000 workers, mainly from marginalized backgrounds. An uptick in production costs tied to the tax increase may force many small manufacturers to close their doors, leading to job losses and heightened economic instability.
Selim Raihan, Professor at the University of Dhaka and Executive Director at the South Asian Network on Economic Modeling (SANEM), remarked, “The first decision, which increases taxes on over a hundred products, is particularly troubling for the public.” This aligns with widespread concerns about tax policies failing to adapt to the pressing needs of the economy's most vulnerable segments.
Export dynamics are also under threat. The biscuit industry significantly contributes to foreign exchange earnings by supplying more than 145 countries. Raising VAT could diminish the sector's competitiveness, resulting in reduced exports and compromised economic viability. This decision counters the aspirations to boost Bangladesh's agro-processing sectors and support growth within the export basket.
It's not just about biscuits; this tax increase raises fundamental questions about the government's broader revenue strategies. Currently, the reliance on indirect taxes places unwarranted burdens on everyday consumers, primarily impacting those who can least afford it. Instead, experts argue for increased tax collection from wealthier citizens and enterprises, many of which benefit from various tax evasions. Raihan suggested, “If the government took stronger action on tax enforcement and ensured those who evade taxes pay their fair share, it could significantly improve its revenue.”
By reassessing these strategies, the government could create a fairer, more balanced economy, ensuring long-term benefits for society. Neglecting to adjust these policies may lead to significant distortions, harming not only individual households but the national economy overall.
The recent suspension of the Trading Corporation of Bangladesh (TCB) truck sale program, which offered subsidized goods to low-income citizens, has added another layer of concern. This initiative was deemed instrumental in providing accessible essentials during these challenging economic times. Its halt runs counter to the urgent need for sustained support for the needy, demonstrating a disconnect between the government's actions and public necessities.
Many believe the government’s approach has underscored poor coordination among its fiscal, monetary, and market policies. New tax hikes and the suspension of support programs are seen as regressive moves at such a sensitive time, exacerbated by high inflation and declining purchasing power.
With these developments painting a bleak picture for vulnerable communities and economic stability, calls for reconsideration of the VAT increase and other related policies are growing stronger. Without urgent action, policies threatening access to basic nutrition and income stability could lead to long-term detrimental impacts on both individuals and the fabric of society.
The government must not overlook its responsibility to prioritize the needs of its citizens, ensuring the continued affordability and accessibility of fundamental goods like biscuits. A tax rebate policy for essentials could provide the necessary relief, reflecting the values of inclusive development and social equity. If not addressed swiftly, the consequences could leave many without their daily sustenance—and significantly disrupt Bangladesh's path toward sustainable growth.