RMG manufacturers demand unchanged tax rates for five years

Readymade garment makers demand unchanged tax rates on their exports and earnings for the next five years in a bid to ensure a strong rebound from the Covid-induced fallouts.

The trade body of the RMG producers, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), is scheduled to place the proposal before the National Board of Revenue (NBR) in a pre-budget talk on Thursday.

Currently, garment manufacturing companies are enjoying reduced corporate tax rates on annual earnings – 12% for general manufacturers and 10% for green factories – while companies in other sectors pay up to 45%.

The BGMEA seeks continuation of the privilege for the RMG sector, according to its prepared budget proposal, while it is also in favour of an unchanged source tax rate on exports. Currently, all the exporters, including garment sector ones, pay 0.5% tax deducted at source, widely known as TDS.  

The proposal also suggests the revenue collecting agency consider the TDS as the final settlement of corporate tax for the RMG exporters.

Besides, it made several other demands such as making customs-related rules easy and reducing duties on machinery and spare parts imports.

In the previous years, the garment factory owners were seen lobbying for keeping the tax rates, especially that on exports, at reduced levels. Starting from the day of placing proposed budgets in the parliament, their tension continued until passing the budgets.

The entrepreneurs believe that they could make investment decisions easily when they remained well-informed about the potential changes in taxes in the immediate future.

The BGMEA, in the budget proposal, presented the current situation of garment businesses in Bangladesh and other competitive countries. "Though our exports increased in the past months, the prices of apparel products did not increase rationally. Moreover, clothing items became 1.59% cheaper in the last seven years," it said.  

The trade body also called for withdrawing value-added tax in the factories making products under sub-contracts and source tax on cash assistance and minimising HS code related complexities in importing raw materials.