Exporters unhappy with source tax rise

Despite keeping existing facilities unchanged and lowering tax to 12 per cent for all export-oriented sectors, exporters are still unhappy with the rise in source tax to 1 per cent from that of 0.5 per cent in the proposed budget.

Even the government has depreciated taka against dollar by around 7.9 per cent in the current fiscal year and still 42 export products are enjoying 1 to 20 per cent cash incentive.

The exporters demanded return to the previous level of source tax.

The Finance Minister AHM Mustafa Kamal announced in the parliament on June 9 that in order to retain the achievement and to get expected revenue from this sector the incentives granted to the textile sector would continue.

The minister said, “Rationalising the rate of source tax carries immense importance in formulating revenue policy. I propose to raise the rate of source tax on export proceeds to 1 per cent from that of 0.5 per cent.”

He also announced to reduce VAT on yarn made from man-made fiber and other fibers from Tk6 per kg to Tk3, VAT exemption for sub-contract factories.

The business leaders, however, said the proposed budget is business-friendly but the source tax hike decision will be a barrier to achieving the goal which the government expected.

There are some proposals in the proposed budget for the business community, which will help flourish the country’s export earnings, BGMEA President Faruque Hassan told The Business Post.

“But increasing source tax to 1 per cent will hinder the growth of RMG sector and it is not time when we are recovering from the pandemic. For the sake of economic growth, the government should keep source tax at 0.5 per cent and it should continue for the next five years,” he demanded.

In the existing FY22 budget, exporters are enjoying 0.5 per cent source tax. Besides, readymade garment exporters are enjoying 1 per cent cash incentive on the export receipts.

Bangladesh Knitwear Manufacturers and Exporters Association Executive President Mohammad Hatem said, “Buyers do not increase clothes prices in line with the rise in manufacturing costs.” But the government collected more revenue as source tax than their target thanks to around $50 billion in export earnings in the current fiscal year.

“I cannot understand how the government proposed to increase source tax despite the hike in raw material prices and global high inflation,” Hatem wondered.

The Bangladesh Textile Mills Association congratulates the budget proposal but they also demanded tax rebate on conveyer belt imports which are now 5 per cent.

Its president Mohammad Ali Khokon also said, “1 per cent source tax will put pressure on the exporters and this is why it should be reduced to the previous level and fixed for a minimum of five fiscal years.”