National Board of Revenue is reviewing a proposal of readymade garment exporters seeking reduction in existing source tax on export earnings. Income tax wing of NBR has already prepared a situation paper on the issue and forwarded it to NBR high-ups for their directions on the issue. Officials said that export-oriented apparel trade bodies including Bangladesh Garment Manufacturers and Exporters Association had been pressurising the government to cut the source tax further. BGMEA demanded reduction in the income tax at source on export proceeds to 0.25 per cent from current 0.60 per cent as part of incentive package to implement the new minimum wage for garment workers and to keep the sector competitive in global market, they said. NBR in September slashed the tax to 0.60 per cent from 1 per cent reinstated in the budget for the current fiscal year 2018-2019.
In this context, income tax wing sought decision of policy makers of the revenue board whether it would proceed on the issue. BGMEA, in a letter to NBR, also demanded that NBR provide the benefit for five years instead of current practice of lowering source tax every year on an ad hoc basis. The association argued that the prices of apparel products had been declining in recent years affecting competitiveness of local exporters. Manufacturers and exporters also made huge investment to ensure safety of workers in workplace in line with two global initiatives after the Rana Plaza collapse. The new wages which raised the minimum wage of RMG workers to Tk 8,000 from previous Tk 5,300 will take effect next month. Exporters immediately after the announcement of the new wage structure demanded additional benefits, either in forms of tax benefit or cash incentives, for implementation of new wages.
Commerce Minister Tofail Ahmed on September 16 also said that the government was mulling over more benefits for apparel sector so that it could remain competitive in the global market following the increase in workers’ wages by 51 per cent. NBR officials said that they were not in favour of a proposal of general exemption but, in most cases, they agreed with such proposal in line with government’s instruction. NBR would decide as per the government instruction in this regard, they said. According to an NBR estimate, previous reduction in source tax may narrow the government earnings from the sector by around Tk 1,600 cr. It will lose Tk 400 cr for reduction in the tax by 0.10 per cent, it estimated.
