To encourage diversification of export goods and ensure a level playing field for all of the export industry, Finance Minister AHM Mustafa Kamal proposed to introduce a 12% tax for all non-apparel goods and services exporters.
He also proposed a 10% corporate tax for all other green industries exporting goods and services.
The current tax rate for the export-oriented RMG sector stands at 12% for general factories and 10% for green factories.
“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 minimized,” said the finance minister.
In his budget speech on Thursday, he also said that export is the main source of foreign currency for the country as it plays a vital role in achieving economic prosperity.
Earlier, almost all export-oriented industrial sectors of the country except the RMG had to pay up to 30% of corporate tax for exports of their goods and services.
Entrepreneurs of non-RMG sectors have welcomed the decision of a massive cut in corporate tax saying that they have been urging this smart move for a long time.
Welcoming the decision, Shaheen Ahmed, president of the Bangladesh Tanners Association (BTA), told Dhaka Tribune that it is a very important decision to promote industries other than RMG and maintain equality with the export-oriented garment sector.
“We have been requesting this for a long time. It will help to improve our competitiveness in the current global economy and will also be helpful in reducing the trade deficit to some extent,” he added.
Talking to Dhaka Tribune, Moazzem Hossain Moti, president of the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), said that they have been asking for this for 8 years.
“This massive cut in corporate tax is a smart move by the government and we welcome it,” he added.
He also said that the packaging and accessories sector of the country meets the major portion of the demand of the RMG sector and exports.
“Due to the pandemic, external issues like inflation, war, hike in raw material prices and transportation costs, the sector has been lagging. In this situation, the decision of the government is welcoming,” he added.
He also said that if a level-playing field is ensured for the non-RMG sectors, it will also help the sectors go for more diversification.
Industry players also called this an export-friendly initiative which may minimize the deficit in the balance of payment in foreign currency.
Welcoming this move, Anis Razzaq, a director of the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) told Dhaka Tribune that it is undoubtedly a smart move of the government and this will play a pivotal role in boosting the investments, both local and foreign.
He also said that LFMEAB, jointly with the Bangladesh Tanners Association (BTA), submitted their proposals to the NBR demanding similar corporate tax for the export-oriented leather goods and shoe sector like that of the RMG sector.
However, the reduced corporate tax rates will not be applicable for transport services, mobile telecommunication services and internet and internet-based services, according to sources.
Tax incentive for ‘Made in Bangladesh’ continues
“In order to increase the contributions of the export sector to our GDP, long-term tax incentives have been granted to ‘Made in Bangladesh’ goods and services in the last 2021-22 fiscal year,” the finance minister said.
As a continuation, initiatives should be taken to create new export sectors, diversify goods and search for new export markets so that ‘Made in Bangladesh’ can be made a global brand.
Also, service export should be given due priority alongside goods export. “As a part of this initiative, I propose to include the export of services in the definition of export in the tax statute,” Kamal added.
“I also propose to exempt the income earned in foreign exchange by ocean-going vessels carrying the Bangladeshi flag from paying tax until 2030, provided the income is brought to Bangladesh through a banking channel,” he further said.
He also said that Bangladesh will be able to establish service export as a potential export industry for earning foreign currency for the country by adopting these proposals.
AHM Mustafa Kamal placed the Tk6,78,064 crore national budget for FY23 at Jatiya Sangsad. Safeguarding marginal people from inflation fuelled by the Russia-Ukraine conflict is the top priority of this year’s national budget.