TBT DESK: The Foreign Investors’ Chamber of Commerce and Industry (FICCI Bangladesh) has welcomed several reform-oriented measures in the proposed Finance Bill 2026 and the FY2026–27 national budget, while cautioning that key provisions may still pose challenges to investment competitiveness and ease of doing business.

In a statement issued in Dhaka on Wednesday, the chamber said it viewed the government’s “3R framework” — Recovery, Restoration and Reconstruction — as a positive step towards building an inclusive, investment-driven economy. It added that the Finance Bill reflects progress in improving clarity, simplification, predictability and digitalisation across tax, VAT and customs systems.

FICCI particularly appreciated measures aimed at modernising revenue administration, reducing taxpayer harassment and improving corporate liquidity. It noted that the treatment of tax deducted at source as advance tax, instead of minimum tax, would ease working capital pressures for businesses. The proposed automated, faceless tax refund mechanism was also welcomed as a move that could help stabilise cash flows.

Other positive measures highlighted include the repeal of restrictions on legitimate business expense deductions due to non-deduction of tax at source, higher limits for perquisites and promotional expenses, and the introduction of accrual-based treatment of interest expenses. The chamber also pointed to reduced disputed tax requirements at appeal stage as a favourable change for taxpayers.

On the VAT side, FICCI said the shift from monthly to quarterly VAT returns would significantly reduce compliance costs. It also welcomed proposed reductions in withholding tax on raw material imports, foreign loan interest and machinery rentals, describing them as supportive of industrial growth and cost efficiency. Initiatives such as the “BanglaBiz” platform and simplified profit repatriation procedures were also seen as investor-friendly.

However, the chamber raised concerns over several proposed measures it believes could undermine regional competitiveness. It said the absence of a clear long-term corporate tax reduction roadmap weakens Bangladesh’s position in attracting foreign direct investment compared with peer economies.

FICCI also flagged the mandatory introduction of eVAT for large taxpayers without a transition period, warning of possible operational difficulties. The proposed increase in the highest personal income tax rate to 35 per cent was described as potentially raising costs for employing skilled foreign professionals.

The chamber further recommended withdrawing the proposed 0.2 per cent Advance Income Tax collection at retailer level, extending cashless transaction incentives to private limited companies, and reinstating investment rebate benefits for individual taxpayers. It also stressed that all fiscal measures should be applied prospectively to avoid market uncertainty.

Turning to the budget framework, FICCI noted that the FY2026–27 expenditure target of BDT 938,000 crore (13.7 per cent of GDP) reflects a significant increase, while the revenue target of BDT 695,000 crore appears highly ambitious. The projected deficit of BDT 243,000 crore will require substantial domestic and external financing, it added.

The chamber said the gap between expenditure and revenue targets highlights the need for stronger revenue mobilisation, improved public spending efficiency and stricter fiscal discipline. It cautioned that achieving the revenue target would depend heavily on expanding the tax base and bringing more taxpayers into the formal system.

FICCI concluded that the ultimate success of the Finance Bill 2026 would depend on effective implementation, policy stability, stronger institutional capacity and sustained improvements in the ease of doing business.