The revenue authority are likely to lower the source tax on exports effective from July 1
The government is going to give a big tax waiver to prop up the country's export sector, which has experienced a negative growth in the first four months of the current fiscal year.
The authorities are likely to lower the source tax from 1 percent to 0.25 percent against exports effective from July 1, the source tax on cash incentive from 10 percent to a logical level and may scrap the stamp duty.
Prime Minister Sheikh Hasina has tasked Commerce Minister Tipu Munshi with identifying the reasons behind the declining export growth and the problems in the garment industry and resolving those issues.
In sequel to that, the decisions were taken at a recent tripartite meeting of garment manufacturers, commerce ministry and the National Board of Revenue (NBR) headed by the commerce minister.
An NBR official said according to decisions of the meeting, the revenue authority has already started working on reducing the source tax on cash incentives.
"The NBR chairman and the finance minister will give instructions on what will be the tax rate. Then a new circular will be issued as per their instructions. Besides, the circular on source tax against exports will be amended," the official said.
Export earnings in the first four months of the current fiscal dropped by 6.82 percent year-on-year to $12.72 billion due to the poor shipment of apparel items.
According to the Export Promotion Bureau data, the apparel sector, which accounts for 84 percent of total exports, witnessed a 6.67 percent decline to $10.59 billion in the first four months of the current fiscal year, which was $11.33 billion in the same period last year.
Meanwhile, knitwear products earned $5.53 billion, down by 5.73 percent, which was $5.87 billion in 2018 July-October, while woven goods fetched $5.04 billion, posting a 7.67 percent fall against $5.46 billion in the same period last year
Vietnam has recently secured the second position in garment exports by overtaking Bangladesh. Commerce Minister Tipu Munshi said the government has taken the initiative to get the second positon back again.
"More than 80 percent of the country's total exports is dependent on readymade garments. Exporters faced difficulties due to 1 percent source tax against exports imposed in the current budget, resulting in the export decline," he said.
According to the Income Tax Ordinance, businesses have to pay 1 percent source tax against their exports. However, the revenue authority reduce the tax every year. In sequel to that, the authorities have lowered source tax to 0.25 percent effective from October 21, instead of July 1, the first day of the fiscal year.
In addition to that, the NBR has raised the source tax from 3 percent to 10 percent on cash incentive in the current budget.
The garment manufacturers have claimed that they had to incur losses and blamed the tax measures for the export decline.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Rubana Huq has recently said the traditional exports items do not see any increase in their exports.
"In compare to Bangladesh, the competitive countries including Pakistan, India, Turkey, Vietnam, China and Sri Lanka have devaluated their currencies against US dollar. Besides, Vietnam has signed a free trade agreement with the European Union," she said. "Due to this, Vietnam is taking the benefit of US-China trade war."
The BGMEA president also demanded a number of other incentives such as loan rescheduling, packing credit, increasing the deadline for advance payment, dropping interest rate in the Export Development Fund, withdrawal of source tax on cash incentives and speeding up the shipment unloading process in ports.
NBR Chairman Mosharraf Hossain Bhuiyan said that alongside the government's incentives the garment exporters should avoid completion among themselves to get their expected product price.
"Instead of reducing product price, they have to find out a strategy. We have to emphasise on bilateral trade agreements in the competitive world," he added.