Source tax on export to be slashed

The National Board of Revenue is likely to reduce source tax on proceeds from all export items, including apparels, to 0.25 percent to help increase competitiveness of local products in international markets, said a senior official yesterday.

“We are considering to cut the tax at source so that entrepreneurs can implement the new wages for garment workers,” said the official.

The move followed demands from garments and knitwear manufacturers and exporters after the withholding tax on export earnings went up to 1 percent on the first day of July because of expiry of reduced source tax benefit on June 30 this year.

The tax authority reduced advance or source tax on export earnings of readymade garments twice last fiscal year -- from 1 percent to 0.60 percent to 0.25 percent-- in the face of demands from apparel markers.

The NBR has not extended the reduced withholding tax privilege in its bid to increase collection from exporters to attain higher tax targets.

Apart from garments, jute goods were enjoying 0.60 percent withholding tax on export proceeds since July 1, 2016. The reduced rate ended on June 30 this year.

Jute millers earlier urged the government to withdraw the source tax on export proceeds to help the sector withstand the fallout of anti-dumping duty slapped by India in 2017 and falling demand in other markets abroad.

The official said the source tax on export proceeds from jute goods is also likely to be reduced to 0.25 percent for the current fiscal year.

“We expect to issue a notification in this regard soon,” he said.

Latest data on the collection of tax at source on export earnings are not available. The tax authority got Tk 2,136 crore in fiscal 2016-17 from the source, up 17 percent from Tk 1,811 crore a year ago, according to an NBR annual report.

The tax cut will cause a loss of quite a good amount of revenue, said the official.