12% uniform tax for all export businesses

Finance Minister AHM Mustafa Kamal has proposed a uniform 12 per cent tax rate for Bangladesh’s export oriented sectors, with the aim to ensure a level playing field for all exporters and diversify the export basket.

Meanwhile, this tax rate will be 10 per cent for exporters who are manufacturing goods in a certified green factory.

Kamal made the proposal while unveiling the budget for FY2022-23 in Parliament on Thursday, responding to the local exporters’ long-standing demand for an equal tax rate.

In his budget speech, the finance minister said, “I propose to introduce a 12 per cent tax rate for all other general industries exporting goods and services and 10 percent for all other green industries exporting goods and services.

“This sort of export-friendly initiative will bring down the trade deficit with other countries. As a result, the deficit in the current account, a major economic indicator, will be minimised.”

Industry insiders say this decision will make them stronger, allow them to earn more foreign currency and create new employment opportunities. The move will also help industries that are lagging behind to grow and expand.

In FY22, RMG exporters are enjoying 12 per cent tax, but it is 15 per cent for the Textile sector and 10 per cent for green factory owners.

Research Director at the Centre for Policy Dialogue (CPD) Khondaker Golam Moazzem told The Business Post, “It is a good initiative to bring parity and ensure a level playing field for the promising export-oriented industries. This will help a lot to diversify export baskets.

“However, only tax harmonisation will not be enough to diversify exports, and bring parity with other-export oriented industries. The government should provide other industries with subsidies and incentives that are currently available to the RMG sector.”

According to the Export Promotion Bureau, Bangladesh earned $43.34 billion from the export sector in the first 10 months of the current 2021-22 Fiscal Year.

During this period, the apparel sector’s contribution was 81.58 per cent, home textile 3.07 per cent, leather sector 2.33 per cent, agriculture 2.4 per cent, jute and jute goods 2.23 per cent, frozen and live fish 1.07 per cent.

In the current fiscal year, corporate tax for the leather and leather goods sector was 30 per cent.

Giving his immediate reaction to the proposed uniform tax rate, Bangladesh Tanners Association’s (BTA) Chairman Md Shaheen Ahamed said, “It is a very good decision by the government.

“We suffered for the last four years, but now we are nearing recovery. This decision will help us to boost exports.”

Moazzem Hossain Moti, president of the Bangladesh Garments Accessories and Packaging Manufacturing and Exporters Association said to The Business Post that they are also paying 30 per cent corporate tax and they have urged the government to reduce it on multiple occasions.

“The government has finally responded to our pleas. The move will help us develop this sector further, as the demand for our products is going up day by day.”

Thanking the government for this initiative, Chairman of Bangladesh Terry Towel & Linen Manufacturers & Exporters Association M Shahadat Hossain Sohel said, “We are currently paying 15 per cent corporate tax. This is a good decision, and it will help us reinvest.”

However, jute and jute goods exporters are not happy with the decision because they are currently enjoying a 10 per cent tax rate.

Esrat Jahan Chowdhury, CEO of Tulika Eco and director of the Bangladesh Jute Goods Exporters Association, said, “Despite negative export growth, the government has increased the tax rate for this sector, which will put us in a more difficult situation.

“We are already in a tough spot due to the high prices of raw jute. Export orders have gone down due to the global crisis. I urge the government to reduce corporate tax for the jute sector considering the crisis we are currently navigating through.”

Abul Hossain, chairman of the Bangladesh Jute Mills Association, said, “Uniform tax rate will give flexibility to other sectors, but the move will put more pressure on us. Jute goods are environment-friendly and hundred per cent value added.

“This is why I am requesting the government to reconsider this decision. The government should also consider withdrawing the source tax on the jute sector and two per cent tax on raw jute purchase.”