The recent increase in value added tax (VAT) and supplementary duty on almost 100 goods and services reflects the government’s failure to negotiate effectively with the International Monetary Fund (IMF), economists said at a round table yesterday.

They claimed that the government raised VAT in line with IMF conditions to generate a further TK 12,000 crore in revenue.

However, they claimed that this goal is unlikely to be fulfilled, which ultimately burdened companies and consumers instead.

“The government could not negotiate properly. The IMF often pushes to increase the tax-to-BNP ratio, but the time is crucial,” said M Masrur Reaz, chairman of Bangladesh’s political exchange.

The speakers said the government raised VAT in line with IMF conditions to generate an extra TK 12,000 crore in revenue

“This is a complete failure to negotiate the government, of which the National Board of Revenue (NBR) was part,” he added.

Reaz made the remarks during a round table discussion entitled “The Burden of Further Taxes on Consumers: Ways to Overen it”, organized by Jagonews24.com, an online news portal, in the Metropolitan Chamber of Commerce and Industry (McCi) premises in the capital.

With reference to a study, Reaz pointed out that it can lead to a 14-fold increase in natural GDP growth, while the revenue collection could increase by 6.5 times.

“We often change tax policies without implementing appropriate impact assessments, which creates uncertainty and hinders economic growth,” he added.

Prof MM Akash, a former professor of economics at the University of Dhaka, said: “I think the IMF negotiations failed.”

He added, “This VAT’s hike was not a deliberate trait by the government; rather they were left without alternatives.

“But this decision will not achieve its intended goal. The revenue collection will not improve, and instead of escaping the crisis, the government will be in deeper problems – I make this prediction.”

Mustafa K Mujeri, CEO of the Institute for Inclusive Finance and Development, criticized the time of the decision as well as the reasons.

“The government has made a wrong decision at the wrong time,” he said. “Instead of carefully considering the consequences, they rushed into this as a simple solution under IMF’s recommendations.”

He further noted that the IMF and World Bank’s policies have historically failed in Bangladesh.

“The current IMF recipe will also fail, which is why decision makers are now moving his attitude,” he added.

Companies also expressed a strong opposition to the recent VAT hike.

Ahsan Khan Chowdhury, chairman and CEO of Pran-RFL Group, warned to be unfair to lay a tax burden on compatible companies can have serious consequences.

“If only law -abiding (compatible) companies are vigorously taxed, good companies will fight to survive in the future,” he warned.

“If companies fail, employment will stagnate, the standard of living will not be improved and trade and trade will be affected.”

Chowdhury urged NBR to get involved with business leaders and policy thinkers to explore ways to improve the tax collection per capita.

“Increasing taxes on important goods in the middle of the year will do more harm than good,” he added.

“Raising VAT and tasks on daily necessities will not benefit anyone. It will only make life more difficult for both consumers and companies.”

Mohammad Hatem, chairman of Bangladesh Knitwear Manufacturer and Exports Association, emphasized that inflation has remained high for a longer period and efforts to limit it has failed.

“At the same time, extortion in markets such as Jatrabari and Karwan Bazar continues uncontrolled. Who benefits from this extortion? The same applies to the transport sector. If extortion in these areas is to limit, inflation will of course decrease,” he said.

Khondaker Golam Mozzem, research director of the Center for Policy Dialogue, and Ashraf Ahmed, former president of DCCI, spoke at the event.