Garment makers, the country’s main export earners, yesterday sought full waiver of source tax on export receipts for three years as a helping hand as they look to hit $50 billion in shipments by 2021.
At present, the tax authority collects 0.70 percent tax on total export proceeds from major export items, including garment.
The amount of source tax collection from apparel shipment would not be more than Tk 2,000-2,500 crore on export receipts of $30 billion, said Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association.
“This is not a big amount,” he said in a meeting with high officials of the National Board of Revenue ahead of formulation of tax measures for fiscal 2018-19.
The government plans to frame a budget of more than Tk 400,000 crore for the next fiscal year. There would be no big impact if the source tax is not collected from garment exporters considering the sector’s contribution to direct and indirect job creation, he added.
o, please waive the tax,” he added.
The plea from garment exporters comes at a time when apparel shipments are on the rise.
Garment shipments rose 9 percent year-on-year to $22.83 billion in the first nine months of the fiscal year, according to data from the Export Promotion Bureau.
The tax collector does not maintain sector-wise corporate tax collection data.
Yet, three taxmen said source tax collected from export proceeds of garments is roughly the amount of income tax the government gets from the apparel sector.
The apparel makers enjoy a reduced corporate tax rate of 12 percent.
“And many firms submit income tax returns in a way that their total tax does not exceed the source tax collected from export proceeds,” said a senior official of the NBR seeking to remain unnamed. The BGMEA president also demanded a reduction of corporate tax to 10 percent for all exporters. At the meeting, cloth merchants and some apparel makers got into an argument on the misuse of the bonded warehouse privilege.
The cloth merchants said a section of garment exporters, including non-existent firms, are importing fabrics duty-free and are selling them in the domestic market. “This hurts importers and producers who make cloth for the domestic market,” said Md Shamsul Alam of the Bangladesh Cloth Merchant Association.
But the BGMEA president said the leaked items are bought by cloth merchants. The domestic weaving industry is suffering for the leakage of goods from bonded warehouses and the smuggling through borders, said the Bangladesh Specialised Textiles Mills and Powerloom Industries Association. In response, Rahman said the BGMEA would examine the status of bonded warehouse licence-holding firms in the apparel sector and requested the revenue board to cancel the licences of non-existent firms to prevent misuse. The Bangladesh Knitwear Manufacturers and Exporters Association demanded fixation of tax at 0.50 percent only on cutting and making instead of the source tax on export proceeds.
The Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh called for a reduction of tax on technical assistance and royalty fees. It also demanded duty-free benefit for importing fire and electrical items to ensure fire safety at factories. NBR Chairman Md Mosharraf Hossain Bhuiyan said the board would try to provide the same benefit to all exporters to encourage shipment in both volume and value.