In the budget for FY19, the government had set the corporate tax at 15% for readymade garment (RMG) manufacturers and at 12% for owners of green factories
In a bid to encourage exports, the Bangladesh government has reduced tax at source on the export of products, except jute goods, from 0.7% to 0.6% for the current fiscal year.
In addition, the government has also reduced the corporate tax rate from 15% to 12% for apparel manufacturers in FY19.
In the FY17, the government had set tax at source at 1% for garment exports, but later cut the rate to 0.7% through a Statutory Regulatory Order (SRO) due to the demands of exporters.
The tax at source rate had risen back to 1% following the expiry of the SRO, but the National Board of Revenue (NBR) issued a new SRO in this regard on Monday.
According to the new SRO, 0.6% tax at source on all exports except jute products will be effective from July 1, 2018, to June 30, 2019.
Meanwhile, the corporate tax rate for manufacturers and exporters of knitwear and woven products will remain at 12%. Owners of factories which have been internationally certified as green buildings will have to pay 10% corporate tax.
In the budget for FY19, the government had set the corporate tax at 15% for readymade garment (RMG) manufacturers and at 12% for owners of green factories.
“The government has decided to reduce tax at source as there were strong demands from garment manufacturers. However, the government reduced the rate for all export sectors in order to ensure a level playing field,” an NBR official said, asking to remain anonymous.
The official added that the government had also decided to offer better incentives to exporters as it is an election year.
He further said the corporate tax rate has been reduced in order to lighten the burden on apparel makers, as the Minimum Wage Board is going to increase wages.
“Since the ready-made garments industry is contributing over 83% to national exports and generating employment, especially for the rural women, the government has considered the demands of the sector,” a high official of the Finance Ministry told the Dhaka Tribune, asking not to be named.
Issues such as a new wage structure and improvements in compliance and safety were taken into consideration when lowering the corporate tax and tax at source rates, he added.
According to data from the Export Promotion Bureau (EPB) released on Wednesday, Bangladesh’s export earnings from the RMG sector stood at $30.61billion, posting 8.76% growth in the last fiscal year. The figure is 1.51% higher than the target of $30.16 million for FY18.
Bangladesh’s overall export earnings rose by about 5.8% to $36.66 billion in FY18, as compared to $34.65 billion in FY17.
Praising the government decision to reduce the corporate tax and tax at source rates, Exporters Association of Bangladesh (EAB) President Abdus Salam Murshedy told the Dhaka Tribune: “This is an admirable and timely decision that will benefit the country’s export oriented business community. It has been a long standing demand of exporters to ensure a level playing field, so the decision will definitely encourage them to move forward.”
Salam, also a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), added that the cut in corporate tax would attract more investment, which is badly needed for creating jobs for the next generation and to achieve the government vision of becoming a developing country.