Last week’s Budget proposes to more than double tax at source on garment exports from 0.3% to 1%.
We agree with the BGMEA and BKEMA that the proposed increase risks hampering the export growth of the ready-made garment sector and should be reconsidered.
Other export-oriented sectors will also see this tax increase to 1% from their current rate of 0.6%. While these increases follow a previous interim reduction from 0.8%, they are unexpected by exporters who have still been having to overcome obstacles from hartals and blockades.
In the first 10 months of the last financial year, political instability has kept export growth to only around a third of the national target of 10%.
The proposed increase also does nothing to broaden the tax base as it directly affects that are already contributing heavily to economic well-being and paying considerable taxes.
With four-fifths of Bangladesh’s export earnings coming from RMG, the sector can do more for the nation if it is helped to grow exports to meet its “$50bn by 2021” target and secure new jobs, rather than by paying higher taxes at source.
Now is not the time to increase costs that could hamper the sector when its growth is vital to helping the government achieve its stated target of 7% GDP growth.
The government should promise to use the increased revenues it is seeking from the industry for investment in helping export-oriented industries.
It should commit to go beyond the measures already announced such as exempting VAT on safety equipment and increase investment in skills development and promoting EPZs to attract the investment needed to increase productivity and exports.
