Many garment units in Bangladesh are not submitting tax returns, pointing to the fact that tax compliance is poor in the country’s main export industry. There are 4,500 readymade garment companies operating in Bangladesh, including knitwear and woven factories, and about half of these do not submit returns. There is a suggestion that the various incentives the sector is given should be linked with tax compliance and only compliant companies should be eligible for enjoying incentives.

Right now tax at source is deducted at the rate of 0.60 per cent on export bill of apparel exporters. Later, exporters adjust the amount by calculating their income at regular corporate tax rates of 35 per cent. Until June 30, 2014, exporters had enjoyed a special rate of tax at 10 per cent at the time of calculation of their income. Apart from export-oriented garment industries, local garment companies have to pay tax at regular corporate rates.

However, BGMEA, the association representing garment owners says none of their members are defaulter. BGMEA says all readymade garment companies submit tax returns and that members can renew their license only by submitting a copy of the tax receipt. The association says there may be pending cases with some companies due to disputes with the taxmen that causes delay in submission of tax returns.