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Government plans new tax for non-compliance

  • Published at 09:22 am April 26th, 2013
Government plans new tax for non-compliance

The government is planning to impose a new non-compliance tax and stricter laws on garment factories in the wake of the collapse of a building in Savar, which housed several apparel units.

The cash subsidy provided to garment factories may also be curtailed for non-compliance, officials said.

“We will discuss the imposition of a new tax on non-compliant garment factories at the next meeting of the Social Compliance Forum, after the rescue operation at Savar ends,” Commerce Secretary Mahbub Ahmed told reporters yesterday.

He said the Savar incident might have a global impact on the country’s garment sector, so the government will handle the issue carefully, as it is now facing queries from the US Trade Representatives to retain the US General System of Preference (GSP) facilities.

“However, we will stand by the affected workers of the five garment factories in Savar,” he said.

The collapse of the eight-storey building left around 300 people dead and more than 1,800 injured.

The BGMEA report submitted at the last meeting of the Social Compliance Forum in February revealed that 585 of the 586 factories surveyed had alternative staircases or exits while 581 had firefighting equipment.

The report said the number of trade unions in the garment factories increased to 137 from 130.

The forum’s last meeting had fixed the deadline for dismantling the roofs of 25% of factories that had been built with corrugated iron sheets.

Shubhashish Bose, vice-chairman of the Export Promotion Bureau (EPB), said the bureau had formed a four-member committee to investigate the Savar incident and submit its report within three days. The team will also see if these five garment units receive the government’s cash subsidy.

Commerce ministry sources said the authorities concerned have expressed worries about the huge expenses on account of cash incentives (subsidies in effect), as some beneficiary factories are far from achieving the desired level of performance in export earnings and social compliance.

In the current fiscal year, local exporters have already spent Tk24bn allocated as the subsidy for this fiscal year.

The subsidy is worth 10% of total garment exports. The cash incentive or export subsidy was Tk18bn in the last fiscal year.

Twenty-nine years ago, the incentive was 25%. Garment exports also enjoy facilities of duty rebates when opening LCs, according to the EPB.

AB Mirza Azizul Islam, former finance adviser to a caretaker government, told the Dhaka Tribune garment factories complying with the rules would receive more cash incentives or subsidies. Strict monitoring will reduce the number of incidents like Savar.

He said the government might formulate a new law to stop garment units from operating in non-complying factories.

He pointed out that the non-compliance of garment factories was not a major issue six years ago when the caretaker government increased the cash incentive or subsidy.

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