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Apparel manufacturers in Bangladesh introduce tax reforms

The Bangladesh Garment Manufacturers and Exporters Association has propsed certain tax reforms in its budget proposal for the fiscal year 2016-17. Apparel manufacturers say they want 0.3 per cent tax at source in the next fiscal year’s budget to remain competitive in the global market and uphold export growth as the production cost has increased due to safety standards improvement work.

Currently, the largest export sector of Bangladesh is paying 0.6 per cent tax at source, which was 0.3 per cent earlier. The proposal will be placed to the National Board of Revenue (NBR) next week. The apex body of ready-made garment industry also sought a five-year extension for reduced tax benefit for the country’s apparel makers.

Prices of apparel products continued to slide in the global markets including the US and the European Union while production cost has risen by 12 per cent, according to BGMEA Vice-President Mahmud Has an Khan Babu. As a result, RMG sector is going through a huge pressure to remain competitive with the global competitors, he added.

This is the reason why the industry wants to reduce the tax cut at source to 0.30 per cent. According to the BGMEA, the price of Bangladeshi RMG products has been cut by 2.45 per cent in the US market and 0.87 per cent in the EU market during January-July period last year. Euro was devalued by 11.87 per cent against US dollar in the last one year.

Many in Bangladesh are of the opinion that to help the export-oriented RMG sector, the government should reduce tax benefit for the import of LED lights and other related products. Another expert said the government has provided a lot of incentives for the sector, but due to slowdown in global economy, the sector needs policy support.

If all policy supports are met in the next budget, Bangladesh RMG sector will be able to earn $50 billion by 2021,At present, the $25.5 billion RMG sector employs about 4.4 million people, of which 80 per cent are women, mostly from rural areas.