The interim government of Bangladesh is making a drawn out package of tax and duty reforms in the national budget for FY2025–26, aimed at confirming a smooth transition from Least Developed Country (LDC) status and boosting economic growth across key sectors. Scheduled for presentation on June 2, the proposed budget introduces extensive changes designed to decrease the cost of doing business, boost trade competitiveness, backing local industries, and widen the tax net.
One of the vital goals of the imminent budget is to make parallel Bangladesh’s fiscal and trade frameworks with post-LDC requirements. As the country set to graduate from LDC status in 2026, it faces the gradual loss of preferential trade benefits in key markets, including duty-free access and hassle-free rules of origin. In response, the government is likely to uncover a bundle of tariff rationalizations and structural tax changes to maintain export competitiveness and encourage local productivity.
A key component of the projected reforms is the lessening or withdrawal of additional duties on 622 iteams, alongside a customs duty reduce on 100 supplementary items. These changes are aimed at lower input costs for domestic industries and expedite easier access to raw materials and capital goods. Products likely to benefit include cold storage machinery, paper products, buses, newsprint, medical equipment for cancer treatment, and raw materials for pharmaceuticals and environmentally friendly manufacturing.
The pharmaceutical sector, a strategic export and healthcare industry for Bangladesh, is slated for expanded support. The government is expected to add 79 new items to the prevailing list of duty-free raw materials and medical devices, with a focus on ingredients used in the building of medicines for cancer, kidney, and vascular diseases. This move is designed to both fortify local pharmaceutical manufacturing and cut healthcare costs for consumers.
In a bid to lower operational costs for businesses and inspire voluntary compliance, penalties for import-related misdeclarations are expected to be decrease from 400 percent to 200 percent. Simultaneously, the government plans to waive duties on imports of liquefied natural gas (LNG) and key pharmaceutical inputs, reflecting a broader endeavor to lessen production and energy costs.
The budget also features focused enticements aimed at supporting the growth of small and medium-sized enterprises (SMEs).To help stabilize agricultural prices and reduce post-harvest losses, cold storage facilities will benefit from duty exemptions on machinery and compressors. In the manufacturing sector, duty reductions are expected on raw materials used in toy and cricket bat production. The tariff value of imported finished toys may be capped at $4 per kilogram, while the duty on willow wood—a critical input for cricket bats—could be cut from 37 percent to 26 percent.
In the public transport sector, tax inducements are expected to improve urban mobility and ease traffic gridlock. The import duty on buses with seating capacities between 16 and 40 is expected to be diminished from 10 percent to 5 percent. Additional duty on microbuses seating 10 to 15 passengers may also be plummeted from 20 percent to 10 percent, enabling such vehicles more inexpensive for small-scale transport operators.
To bolster the digital economy and stimulate the export of domestic software, the budget is scheduled to include a reduction in import duties on software development tools, operating systems, databases, and security software—from 10 percent to 5 percent. These changes are planned to bolster local tech firms and support innovation in the IT sector.
On the consumer side, the government plans to make refined sugar more affordable by diminishing the specific duty from Tk 4,500 to Tk 4,000 per tonne. However, while simplification duties for essential goods, the budget also aims to increase revenue by raising customs valuation on luxury items. The minimum tariff value for lipsticks and face wash may be doubled to $40 per kilogram, and similar surges are predicted for imported chocolates, leading to higher retail prices for these products.
Among other proposed revenue initiatives, the import duty on helicopters is set to surge sharply from 1 percent to 10 percent. This is anticipated to impact industries and services that lean on helicopters for transport, logistics, and emergency response, while serving as a revenue-generating measure targeting expensive imports.
The government is also mulls about waive the standing 15 percent Value Added Tax (VAT) on LNG imports. This is projected to help cut energy costs for power generation and industrial production, backing to greater energy security and lesser operational expenses in energy-intensive sectors.
On the income tax front, the government is expected to reintroduce a 30 percent tax rate for high-income individuals as part of a broader endeavor to bolster direct tax collection. A new progressive tax pattern may be launched, with revised income slabs to confirm a more equitable distribution of tax liabilities. These adjustments are envisioned to increase the tax base and reduce the government’s reliance on indirect taxes.
To address external trade challenges, especially those arising from the United States, the National Board of Revenue (NBR) is scheduled to offer zero import duties on an additional 100 products. The move aims to offset the potential impact of a 37 percent tariff on Bangladeshi exports to the U.S. market. Items included in this initiative cover raw materials for the textile sector, military equipment, and industrial machinery—sectors that are pivotal to maintaining Bangladesh’s export competitiveness.
Overall, the FY2025–26 budget aims to strike a equilibrium between endorsing investment, caring domestic industries, and generating sustainable revenue. By streamlining tariffs, easing compliance, and assisting priority sectors, the proposed reforms seek to position Bangladesh for a steady and competitive transition into its post-LDC future.
