BGMEA slams source tax

The source tax on garment exports will rise 0.3 percentage points to 1 percent from July 1, in a fresh blow to the sector already hit hard by volatile economic situation in major export destinations.

The statutory regulatory order of 2016-17 that brought down the tax to 0.7 percent ends on June 30.

Finance Minister AMA Muhith also did not extend the June 30 timeline for source tax in his budget speech for 2017-18.

The growth of garment exports fell 2.21 percent year-on-year to $23.13 billion in the July-April period of 2016-17, said Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“The growth in the July-April period is the lowest in the last 10 years.”

He spoke at a press meet at the office of the association in Dhaka yesterday.

Garment exports maintained 13 percent growth over the last 10 years, but it fell mainly due to instability in the major export destinations like the EU and the US, Rahman said.

Export earnings fell 6.06 percent short of the last 10 months' periodic target of $24.62 billion, according to the data of the Export Promotion Bureau (EPB).

Due to Brexit, garment exports to the US fell by 6.80 percent and to the UK by 5.91 percent year-on-year in the July-April period of 2016-17, he said.

For Bangladesh, the US is the single largest export destination while the UK is the third largest.

During the period, knitwear export grew only 4.81 percent year-on-year to $11.26 billion while woven garment exports fell 0.14 percent to $11.89 billion, according to data from the EPB.

If such situation continues, it will be impossible to achieve the export target of $30.37 billion at the end of the year, Rahman said.

“We will also not be able to export garment items worth $50 billion by 2021.”

“So, we urged the government to withdraw the source tax, reduce the corporate tax to at 10 percent and give cash incentives for the sector,” Rahman said.

The cost of production has been increasing at over 8 percent annually, although the prices of apparel items have been declining worldwide, he said.

Muhith cut the corporate tax on garment sector to 15 percent from the existing 20 percent for 2017-18. Such tax for green garment factories has also been reduced to 14 percent in the proposed budget placed by the minister on June 1.