National Board of Revenue (NBR), has reduced the source tax on export proceeds for all sectors from 1.0 percent to 0.25 percent to boost mainly ready-made garment (RMG) export competitiveness.
Tax collection body issued an order on 21 October with immediate effect. In line with the order, the reduced source tax rate will remain till the end of this fiscal year 2019 – 2020. However, exporters will not be able to adjust or get refund of the source tax paid at a rate of 1 percent between July 1 and October 20, 2019, according to the order.
Bangladeshi garment exporters, among others, have long been demanding for source tax reduction. RMG exporters said that apparel sector has been losing its competitiveness in the international market due to challenges on the domestic and international fronts. Earlier, BGMEA president Rubana Huq, in a letter to the Prime Minister’s Office, had said that the sector was facing difficulties to stay competitive due to hike in wages for garment workers.
Due to cut in the source tax rates, NBR will reportedly lose approximately 20 billion BDT as source tax this year from the garment sector, which contributes more than 80 percent of the total export income of the country.
However, the tax reduction decision was made in the wake of sluggish growth in export income in recent months.
Bangladesh’s export earning in the first quarter of the current 2019-20 fiscal year fell 2.94 percent year-on-year to 9.65 billion U.S. dollars.
Of total earnings, Bangladesh’s Export Promotion Bureau (EPB) data showed the country’s income from ready-made garment items, including knitwear and woven, stood at 8.06 billion USD during July-September period of the current fiscal year.
In the first quarter of the current 2019-20 year, the EPB data showed, knitwear garment export growth declined 1.64 percent to 4.17 billion USD, while woven garments fell 0.87 percent to 3.89 billion USD, comparing with the same period of last fiscal year.
In wake of major ready-made garment export slowdown, the EPB data showed overall export income for the last month was 2.92 billion USD, about 230 million USD lower than that in the same month a year ago.
Bangladesh set its export target in 2019-20 fiscal year at 45.50 billion USD, including 38.20 billion dollars from ready-made garment products.