Analysis: Small and medium entrepreneurs are the lifeblood of any country’s economy. From creating jobs to meeting demand at the local level, they are everywhere.
But the recently passed Finance Act 2026 has brought major bad news for the country’s small traders, the piece argues. Through a change to section 163(6) of the Income Tax Act 2023, the tax-exemption benefit that previously applied to small and individual-level entrepreneurs on annual turnover of up to 4 crore taka (40 million; about $335,000) has been withdrawn entirely. In its place, a mandatory 1 percent minimum tax has now been imposed on their total sales, or turnover. Though it may look like an ordinary step to raise revenue, its negative effects will make small traders’ struggle to survive even harder, according to the analysis.
Under the previous tax regime, if an entrepreneur’s annual turnover was below 4 crore taka, they paid income tax based on their actual net profit and according to the slabs set for individual taxpayers. The advantage was that if a business made a loss or low profit for any reason, the tax burden was also lower. But the new provision looks at the sales figure rather than profit. Now, whether a business runs at a profit or a loss, 1 percent of total sales must be paid to the government as tax. This rule may help meet the government’s revenue-collection targets, but in ground-level reality it will push small entrepreneurs’ capacity into serious challenge, the piece says.
How much will tax rise?
An analysis of recent figures shows how sharply small traders’ tax burden has risen under the new law. For example, take a trader with annual sales of 50 lakh taka (5 million) and taxable income of 2.5 lakh taka after all costs (assuming a 5 percent net profit): under the old rules they would have paid no income tax at all, because income up to 2.5 lakh taka was within the tax-free limit. But now they must mandatorily pay 50,000 taka in minimum tax. In other words, a trader who previously paid zero tax must now pay a large sum (50,000 taka) from the outset.
Likewise, for a turnover of 1 crore taka (10 million) and income of 5 lakh taka, the tax was previously just 10,000 taka. Under the new rule they must pay 1 lakh taka — a 900 percent jump in the tax burden. For sales of 2 crore taka and income of 10 lakh taka, the tax was previously 67,500 taka, which has now risen to 2 lakh taka — an increase of about 196 percent.
On a 3 crore taka business, where the tax was previously 1.5 lakh taka, it has now doubled to 3 lakh taka. Even just below 4 crore — that is, at a turnover of 3.99 crore taka — the tax has risen by about 55 percent to 4 lakh taka. Analysing these figures shows that the smaller the business, the higher the rate of increase in the tax burden.
What are the risks?
In principle, this change creates several major risks for the country’s small and medium industry sector, the piece argues. First, it will cause erosion of traders’ capital. Especially for those in trading or low-margin businesses, where the profit rate is just 2 to 3 percent, paying a 1 percent turnover tax means handing half or more of their total profit to the government’s coffers.
If a business is in loss in any year, the tax must be paid out of pocket or by withdrawing capital from the business. As a result, ordinary entrepreneurs may become extremely reluctant to file income-tax returns. They may feel it is safer to stay outside the tax system than to come inside it.
Second, this tax system could increase opacity and a tendency towards tax evasion among traders. To avoid the extra tax pressure, many traders will try to hide their actual sales figures. This will increase under-invoicing, or showing prices lower than the real ones, in the market. Instead of transacting through transparent banking channels, traders will be more inclined to deal in cash. As a result, the informal sector’s share of the economy will grow, which in the long term will undermine the government’s own goals of digitisation and curbing tax evasion.
Finally, through the Finance Act 2026, the government has taken many positive steps to improve the business environment, the piece notes. Among them, it has withdrawn the minimum tax on the sales of five types of business and startup companies, which is undoubtedly praiseworthy.
But this 1 percent minimum tax burden on marginal traders with turnover below 4 crore taka is a direct blow to their survival, the analysis concludes. The provision to pay tax even while in loss runs counter to the core philosophy of a fair, profit-based tax policy. This provision needs urgent reconsideration so that small entrepreneurs can stay in the mainstream of the tax system and run their businesses honestly. Otherwise, this tax burden will block the path of small-industry growth, which would be harmful for the national economy as a whole.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report