Continue 0.5pc source tax for 5yrs

Garment exporters yesterday demanded the continuation of the existing 0.5 per cent source tax for the next five years.

Apparel makers usually demand for source tax to be reduced to 0.25 per cent both before and after the budget is announced every year.

But this year they came up with the call to keep the tax the same for some time as Finance Minister AHM Mustafa Kamal in his budget speech on June 3 did not clearly mention any rate of source tax.

"The changes in source tax would hamper the business plan," said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

"So, we demanded the continuation of the existing rate of 0.5 per cent source tax as the same source tax is better for long-term business planning," he added.

Hassan was speaking at a press conference at the BGMEA's office in Uttara, Dhaka to express the association's budget reaction. The BGMEA chief also demanded 10 per cent cash incentive on export receipts of garments made from non-cotton fibre.

Globally, the fashion industry has been shifting to manmade fibre thanks to their environment-friendliness, functionality and durability.

However, Bangladesh is still very weak in the trade of manmade fibre and clothing items while competing countries have been making strides in this regard.

Manmade fibre garments occupies 78 per cent of the global business while cotton fibre holds the remaining 22 per cent.

However, some 74.14 per cent of Bangladesh's garment export earnings come from cotton made items.

So, Bangladesh is lagging behind in the mainstream business of manmade fibre garments, which is worth a few hundred billion dollars globally.

New investments will come and a lot of jobs will be created if the government gives 10 per cent cash incentive on export receipts of manmade garment items, Hassan said.

The manmade fibre garment manufacturers will also be able to create new job opportunities and bring back the workers who lost their jobs because of the severe fallouts of the Covid-19 pandemic, he added.

Hassan welcomed the proposed budget for continuing different facilities for the garment exporters and cutting the corporate tax and value-added tax.

He also said the garment sector has already reemployed the workers who became jobless after the Covid-19 outbreak.

However, he could not exactly say how many workers have lost their jobs and how many were re-employed with the opening up of the economy and global supply chain after a pause for lockdowns.

By October and November this year, the sector will witness a full recovery of business, the BGMEA chief said.

However, Hassan urged the government to take measures to remove bureaucratic tangles for the ease of doing business.

Currently, Bangladesh is the global leader in green garment factories and the country's production system has improved to a great extent since the Rana Plaza disaster in 2013, he said.

Of the 100 global Leadership in Energy and Environment Design (LEED) certified garment factories, about 39 are in Bangladesh.

Bangladesh has 143 LEED certified buildings and 40 of them are platinum rated factories.

Ten years ago, the amount of apparel shipments to new markets stood at $700 million, which was 6.88 per cent of Bangladesh's total apparel shipments per year.

Now the rate has increased to 17 per cent to over $6 billion a year.

So, it is indicating that the government's four per cent stimulus for the new markets worked well.

During the 2008-09 fiscal year, the government gave four per cent incentives on export to new markets. Bangladesh considers all the markets as new ones except the EU, US and Canada.

Hassan also said the EU should extend its generalised system of preferences (GSP) to Bangladesh for more than 10 years.

After 10 years, the EU should grant Bangladesh the GSP plus as the south Asian economy was hit hard by the pandemic, he added.