DCCI unhappy with budget focus, FICCI warns of growth challenges

The Dhaka Chamber of Commerce and Industry (DCCI) and the Foreign Investors’ Chamber of Commerce and Industry (FICCI) have praised some budget initiatives, but have remained largely unconvinced by its overall framework.

The DCCI has said the fiscal plan for 2025–26 is “not sufficiently supportive” of an enabling environment for business and investment.

The FICCI, meanwhile, has warned that some of the proposed measures may “adversely affect” business expansion.

Business leaders have also raised concerns about a potential rise in the tax burden on individual taxpayers.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) administrator, however, has broadly termed the budget “positive”.

Finance Advisor Salehuddin Ahmed unveiled a Tk 7.9 trillion budget for FY2026 on Monday.

The proposed spending plan is 6.18 percent higher than the revised outlay of Tk 7.44 trillion for the outgoing fiscal year, and is equivalent to 12.65 percent of the country’s gross domestic products (GDP).

DCCI CHIEF CALLS BUDGET ‘UNINSPIRING’

DCCI President Taskeen Ahmed has said the budget does not offer “concrete guidance” on issues critical to investment, ease of doing business, Cottage, Micro, Small and Medium Enterprises (CMSMEs), or banking sector reform.

Speaking at a post-budget press conference at the DCCI auditorium, he welcomed a few steps – including efforts to control inflation, adjust minimum tax thresholds, broaden deductible expenses, expand the tax net, and roll out an automated return system -- but said these are “not enough”.

“Due to the absence of a specific roadmap, the business environment may come under considerable strain,” he said.

He added that the ambitious revenue target set in the budget could be difficult to meet.

According to Taskeen, with no changes to personal tax thresholds and the removal of slabs, the middle class, particularly salaried individuals, are likely to face a heavier tax burden in the upcoming year.

He also pointed to a 25 percent import duty on automobile spare parts, up from 10 percent, warning that it would increase the cost of local production in the sector.

Taskeen called for a review of the decision to raise the turnover tax from 0.6 percent to 1 percent.

While acknowledging a drop in internet usage costs, he criticised the increased value added tax (VAT) on locally assembled mobile phones, saying it could hurt the growth of the domestic electronics industry.

“Even though the budget includes some steps to curb inflation, the cost of doing business will rise, and that could slow the economy overall,” he said.

The BCCI chief has urged the interim government to bring down borrowing costs from the banking sector to 6–7 percent.

He warned that the high level of borrowing from the financial sector set out in the budget could reduce credit flow to the private sector.

He also noted the absence of a clear roadmap for developing the SME sector, calling it a missed opportunity in a year where economic recovery and private investment were expected to be key drivers of growth.

FICCI RAISES ALARM OVER INVESTMENT CLIMATE

The FICCI has raised fresh concerns about Bangladesh’s investment environment, even as it welcomed parts of the proposed Finance Bill for FY26.

In its post-budget statement on Monday, the chamber said: “While we have identified some positive aspects, a few proposals raise concerns that could adversely impact business expansion and place an extra tax burden on compliant taxpayers.”

The chamber credited the Finance Bill for efforts to ease pressure on key sectors and move towards a more predictable tax structure.

It called the reduced withholding tax on construction companies and essential goods a “pragmatic step” that would offer relief to major industries.

It also welcomed the exemption of withholding tax on dividends from joint ventures, saying it would benefit international investors.

The FICCI praised the move to give precedence to double taxation avoidance agreements over the Income Tax Act 2023, calling it a step in line with international standards.

The group, however, flagged several proposals as “controversial”.

It singled out the plan to impose an additional 7.5 percent tax on publicly listed firms that floated less than 10 percent of their shares through IPOs, describing the measure as “concerning” and “discriminatory”.

The FICCI also objected to the scrapping of reduced corporate tax benefits for companies that conduct transactions through banking channels.

It warned that raising the effective tax rate to 27.5 percent runs counter to national efforts to promote the formal economy and could leave Bangladesh trailing peers like Vietnam and Indonesia in competitiveness.

PRAISE FROM BGMEA

The BGMEA has described the proposed budget as “positive and aligned with broader development priorities”.

In a statement, BGMEA Administrator Anwar Hossain said the budget shifts away from overly ambitious targets to prioritise education, healthcare, governance, civic services, job creation, the Fourth Industrial Revolution, and Bangladesh’s graduation from least development country (LDC) status.

He noted that keeping inflation at 6.5 percent, if achieved, would benefit low-income groups, including garment workers.

He also praised increases in allowances and beneficiaries under social safety programmes.

Calling the decision to avoid electricity price hikes while cutting production costs by 10 percent “industry-friendly”, Anwar said such steps would keep operational costs stable.

He also praised the VAT exemption on LNG imports and lower import duties on petroleum and diesel, adding that these moves would ease inflationary pressure and reduce manufacturing costs.

Anwar also lauded the unchanged tax treatment for export-oriented industries and acknowledged steps taken to simplify import-export and bond procedures, which he said would make garment trade more “efficient and competitive”.

BEST NOT TO EXPECT TOO MUCH: MINTOO

Former FBCCI president Abdul Awal Mintoo has said expectations from the current budget should remain restrained, given the interim nature of the government.

“Novelty isn’t the point here -- they’ve tabled a standard fiscal outline. Still, as a legislative instrument, the budget holds potential for reform,” he said.

He lamented the lack of major reforms in critical areas such as health, education, and anti-corruption. “At this moment, we should be realistic and not over-expect,” he added.

Mintoo questioned whether the revenue collection targets were achievable, given the reduced expenditure and current economic conditions. “If trade doesn’t expand and investment remains sluggish, revenue will naturally fall short,” he said.

He warned that Bangladesh’s investment prospects are currently hampered by political uncertainty and instability.

“The dual challenges of political unpredictability and unease have created a hostile environment for investment,” he said.

He added that with inflation consistently outpacing real wage growth, national savings are shrinking --limiting the scope for both investment and job creation.

The business group noted that while the tax-free threshold has been raised for entry-level workers, the new slabs may raise the burden on middle-income employees.

It also warned that tripling VAT on online sales from 5 percent to 15 percent could threaten the survival of local e-commerce platforms.

The FICCI, however, backed the proposed Tk 50.4 billion allocation for the Public-Private Partnership (PPP) fund, saying it could boost foreign investment in long-term infrastructure ventures.