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Dhaka Tribune

Proposed tax at export source may hit SMEs

Update : 21 Jun 2015, 06:59 PM

As the budget proposed increasing tax at source on export-oriented industries, the people concerned feared it would be a shock to the small and medium enterprises sector.

They argued imposition of 1% tax at source would spike production cost, resulting in loss of competitiveness on the global market.

In this backdrop, they urged the government to introduce separate ceilings of tax at source for the export-based SMEs.

The sector people believed it would give a space to widen the business and generate more jobs, helping the country achieve middle income status by 2021.

In the proposed budget for the fiscal 2015-16, the government has proposed raising tax at source on the export-oriented sector to 1%.

Currently, the apparel makers pay 0.30% tax at source, while the other export-based industries pay 0.60%.

“Production cost of export products including furniture, handicraft, diversified jute products and others manufactured in SMEs will go up due to raising of tax at source,” Firoz Al Mamun, head of marketing of Hatil Furniture, told Dhaka Tribune.

He said it would lead the sector to lose competitiveness on the global market. 

Mamun said manufacturers and exporters would need to increase prices of products to adjust the new tax, but it could result in loss of global market share as the higher prices might discourage buyers to source from Bangladesh.

He said as the small-scale export sector is struggling to gain market, the government should give policy support to expand it and reduce dependency on import of some specific goods.

“We are demanding full exemption of source tax for small export sector as it is already in trouble due to depreciation of euro against dollar,” said Md Rashedul Karim Munna, managing director of Creation Private Limited, a manufacturer and exporter of environment-friendly jute diversified products.

He said if the government wants to impose tax at source, it can introduce separate ceiling for big, small and medium enterprises.

The government should consider the global economic situation as the main export destination Europe is going through a crisis, he said.

“The handicraft sector should not be brought under tax at source as it contributes directly to poverty reduction,” said SU Haider, president of Bangladesh Handicrafts Manufactures and Exporters Association (BANGLACRAFT).

He said it should be scraped, otherwise the growth of the sector and poverty reduction would be hampered.

To generate more jobs for achieving the middle income status, the government should provide incentives to the sector, Haider said. 

He called on the government to allocate more fund for marketing, products diversification and market exploration to enlarge export basket. 

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