Finance Minister Amir Khosru Mahmud Chowdhury today said the government’s strategy for bringing down inflation would focus on policy reforms, reducing the cost of doing business and improving supply-chain efficiency, while expressing hope that a new pay scale for government employees would contribute to lowering corruption.

Speaking at a post-budget press conference at the Osmani Memorial Auditorium in the capital this afternoon, following the presentation of the FY2026-27 national budget on Thursday, the finance minister acknowledged that inflation remains one of the country’s biggest economic challenges and warned that the problem cannot be solved through short-term administrative measures alone.

“Inflation is not a three-month issue. It has been building up for years, and over the last three years it has become a persistent challenge. On top of that, the Middle East conflict has added a new external pressure,” he said.

The finance minister noted that Bangladesh is facing both domestic and international inflationary pressures. He said rising global fuel prices, supply disruptions caused by geopolitical tensions and increasing import costs continue to affect local markets.

At the same time, he pointed to structural weaknesses within the economy, including inefficiencies in business operations, logistics and financing.

“Banks are carrying huge capital shortages because of years of looting and money laundering. As a result, the cost of funds remains very high, and that cost is ultimately reflected in prices,” he said.

The finance minister explained that obtaining business permits often takes months, while inefficiencies at ports, customs and regulatory agencies increase costs throughout the production and distribution chain.

“From obtaining a licence to receiving goods from the port and transporting them to factories, costs continue to rise at every stage. All these costs are eventually added to the price consumers pay,” he said.

He stressed that inflation cannot be controlled by market raids or law enforcement actions alone.

“Prices cannot be controlled by deploying police, RAB or government officials. Inflation must be controlled through sound policies and efficient management,” he added.

The government, he said, plans to reduce business costs through deregulation, digitalisation, improved logistics and greater transparency. It also intends to move away from excessive reliance on spot purchases of fuel and essential commodities and instead adopt long-term procurement strategies.

“If we can reduce our domestic cost of doing business, it will have a positive impact on inflation. We want to build reserves and maintain better planning in fuel, food and fertiliser procurement,” he said.

On the issue of government salaries, the minister defended the decision to introduce a new pay scale, noting that public servants have not received a major salary revision for nearly 11 years despite significant increases in living costs.

“The government employees have also been suffering from inflation. While wages in the private sector have adjusted over time, government employees have not had a pay-scale revision for more than a decade,” he said.

Asked whether higher salaries would reduce corruption, the minister replied: “When people face financial hardship, there is naturally a tendency to seek unethical means. We hope that as incomes rise and living standards improve, corruption will decline.”

He added that improving the quality of public services and strengthening accountability would remain essential alongside salary adjustments.

The proposed budget projects inflation at 7.5 percent in FY2026-27 and places strong emphasis on reforms aimed at lowering structural business costs and improving economic efficiency.

Information and Broadcasting Minister Zahir Uddin Swapon, Power, Energy and Mineral Resources Minister Iqbal Hassan Mahmood, and Education Minister Dr. A N M Ehsanul Hoque Milon were present there.

MSH

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."