The National Board of Revenue (NBR) wishes to set the tax at source based on export value, instead of on export return earnings.
Currently, the tax at source is based on export earnings, at a rate of 0.7%.
NBR Chairman Md Mosharraf Hossain Bhuiyan made the proposal at a pre-budget meeting with business leaders from the export sector.
In the meeting, the Exporters’ Association of Bangladesh (EAB) urged the government to set a fixed percentage tax at source for the next five years to make it easier for entrepreneurs to take policy decisions.
In response to the exporters’ call, the NBR chair said they were considering not changing the rate of tax at source, but may instead set a tax at source on export proceeds instead of on realized earning from exports.
However, the EAB opposed the proposal, saying it would hurt businesses.
“It will not be a wise decision as it will compel the exporters to pay taxes based on the unrealized amount, which will cause losses to the business,” EAB First Vice-President Mohammed Hatem told the Dhaka Tribune.
The business leader added that at source taxation for the export oriented sectors should be fixed for the long term, for a minimum period of five years.
“If there is a long term tax policy, it helps business people to make informed investment decisions,” he said.
Replying to the business leaders’ comments on tax at source, the NBR chair said it would be set for the next few years, regardless of whether it is cut or increased in the next budget.
Meanwhile, the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) urged the government to set the tax at source at 0.5% instead of 0.7% for the next fiscal year.
Prices of raw materials have increased, while the prices of finished goods are declining. As a result, RMG manufacturers are cutting the prices of accessories, BGAPMEA President Abdul Kader Khan said in his budget proposal.
“To remain competitive, the government should cut tax at source to 0.5% for the sector,” he added
The BGAPMEA has also requested a 12% corporate tax rate for FY2018-2019. Currently, the sector pays 35% corporate tax.
“Despite being a fully export oriented industry, the garment accessories and packaging manufacturers are paying 35% corporate tax,” said the BGAPMEA president.
He added that the 35% rate was discriminatory, as exporters of knitwear and woven products presently pay 12% corporate tax, while garments manufacturers who operate certified green factories have to pay 10%.