In a bid to revitalise the country’s export sector, the government has initiated reduction of tax at source imposed on cash incentive. Besides, the government is also going to revoke the stamping of duty on bill of exchange of export products. According to Export Processing Bureau (EPB), in the first four months of the current fiscal, RMG export was worth $1,057.73 crore, against a target of $1,202.92. The amount not only falls short of the target, but is also lower by six percent than that in the same period of the previous fiscal.
The export of readymade garments decreased by more than 6.5 percent over the same period of the previous fiscal year. In addition, the government has taken effective decision on July 1 to issue tax deduction at source. It is reported that Prime Minister Sheikh Hasina gave the responsibility to Commerce Minister Tipu Munshi to find out the reasons for the decrease in export earnings, and to identify the existing problems of readymade garments. Following this, a meeting was held at the secretariat on November 6 and chaired by the Commerce Minister.
Chairman of the National Board of Revenue (NBR), finance secretary, senior officials of Bangladesh Bank, BGMEA president Dr Rubana Haque, FBCCI vice-president Siddiqur Rahman and former president Shafiul Islam Mohiuddin attended the meeting. The income tax ordinance imposed 1 percent tax on the source of export earnings. Every year, the source tax is deducted. As in the last time, the tax rate at source has been reduced to 0.25 percent by notification. That is, exporters will have to pay tax at the rate of 1 percent against export earnings from July 1 to October 20. On the other hand, in the current budget, the source tax was raised from 3 percent to 10 percent.
Rubana Haque cited the latest data, saying that despite the decline in the prices of commodities and conventional products, the export of man-made fabric jackets had increased. However, export of conventional exportable products is not increasing. Competing countries, like Pakistan, India, Turkey, Vietnam, China and Sri Lanka have depreciated currency against the dollar. In addition to other incentives, Vietnam has signed a free trade agreement with the European Union. Because of this, Bangladesh cannot take advantage of the ongoing trade dispute between China and the United States. Most of the business is moving to Vietnam. While the ease of doing business index is improving, it is much less than those in the competing countries.
The BGMEA President made four proposals for the development of readymade garment sector. These are - tax notification on reduced source, withdrawal of 10 percent source tax on cash assistance against exports, effective from July 1, bank loan waiver of all types of garment factories, extension of loan repayment of small and medium garment factories, special incentives for multipurpose garment products and increasing domestic and foreign investment in man-made fiber production.
In view of this, NBR chairman Mosharraf Hossain Bhuiyan advised the garment exporters to avoid reducing the price of the products by competing among themselves, and find out strategies to reduce the price of the product all at once. India, China, Vietnam are allowed to import goods at low tariffs, but Bangladesh has to pay high tariff even though it is an LDC. Because of this, exports to the US are being disrupted. He assured that the problems of the garment sector would be resolved through discussions with the Prime Minister and the Finance Minister.
Shafiul Islam Mohiuddin said, buyers are buying goods from Vietnam and China, due to port deregulation, and non-cooperation of customs. Due to unrealistic targets, officials forcibly tried to collect revenue from the traders. He called for the NBR chairman to stop harassment in the name of advance investigation report on product testing. In this regard, the chairman of the NBR said that the importers of the goods would be listed on a commercial basis.
A senior NBR official said that according to the meeting's decision, NBR has started working on reducing the source tax. The NBR chairman and finance minister will provide guidelines on how much the tax rate should be. According to their instructions, a new notification will be issued. Besides, work is also being done to amend the tax rate notification on source against export.