Tax rise on exportables unwise: BGMEA

Apparel exporters say the decision will discourage the export-focused industry and investors as well

Dhaka, Jun 7 (bdnews24.com)—Apparel exporters believe the budgetary proposal to increase tax at source on all export products including readymade garments in the next fiscal is an 'inconsiderate decision.'

In an official reaction to the next budget, Bangladesh Garments Manufacturers and Exporters Association President Shafiul Islam Mohiuddin said, "We will be forced to pay the NBR from our own pocket for this tax. We were not ready for this kind of inconsiderate decision."

Finance Minister AMA Muhith proposed imposing a flat 1.20 percent tax at source on all kinds of export products, saying it was necessary in national interest to levy tax from export trade.

In the ongoing fiscal ending June 10, the tax rate at source was 0.70 percent for the readymade garments while 0.60 percent for other export products.

The BGMEA chief cited 10 percent increase in production cost on top of waning demand and falling prices for readymade garments in the international market due to global recession, power and gas crises.

"The tax rate should not have been increased under the circumstances. Instead, what needed was a return to 0.40 percent."

"Our friends at NBR forgot to take the circumstances into considering," he added.

Mohiuddin explained that doubling the tax at source for all exportable goods from 0.60 percent means increasing the direct tax by 100 percent.

"We believe, under the present situation, if the decision remains in effect especially for the readymade garment industry, expansion of the industry will surely be hampered."

He commented that the decision would discourage export-oriented industry and investors as well.

BGMEA also considers the tax rate is contrary to the government target of achieving 7.2 percent GDP in the new fiscal.

"Because the manufacturing sector contributes nearly 25 percent to the country's GDP growth. And putting such a burden on the biggest industry of the sector is not consistent (with the government target)," Mohiuddin added.

He requested the Prime Minister and the Finance Minister for a review before pushing it through Parliament.

"Our request is that the rate of the current fiscal be retained, if it is not possible for the government to reduce it down to 0.40 percent."

Mohiuddin also urged the government for continuing with the ongoing there-year package of incentives for the sector for three more years.

"For this reason, we request an incentive of 5 percent in the 2012-13 fiscal, 4 percent in the next two fiscals and a new market incentive at the rate of 2 percent," he said.

The stimulus package that the government announced against global economic recession in 2009-10 fiscal was supposed to expire this month.

The BGMEA welcomed the proposal of withdrawing VAT on RMG factory site and installation rent, bringing down tax on import of capital machinery and parts to zero, and lifting of VAT on telephone, fax, insurance, courier, banking and non-banking services to the export-focused industries.

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