The government is likely to reduce tax at source on export of all products by 0.20 percentage points to 0.80 per cent in the budget for the next fiscal year from the proposed 1 per cent, officials of the finance ministry said. Bowing down to pressure from the exporters, particularly from the readymade garment sector, the government has decided to reduce the export tax, they said. In the budget proposal before the parliament on June 4, finance minister AMA Muhith proposed an increase of export tax to 1 per cent for apparel and other products from the current 0.30 per cent and 0.60 per cent on export proceeds respectively. According to the proposal, the tax will be considered as final settlement for all export sectors and the exporters will not need to pay any other tax on their export earnings. Currently, export tax on some items including knitwear, woven garments, terry towel, carton and accessories of garment industry, jute goods, frozen food, vegetables, leather goods and packed foods are considered as final settlement. And the tax at source on export of other products is considered as advance tax which can be adjusted with the income tax returns. The National Board of Revenue estimated that additional Tk 2,000 crore would come in the next year from the sector if the export tax was raised to 1 per cent. The revenue board may get around Tk 600 crore less from the sector if the tax is reduced at 0.80 per cent, officials said. Exporters, however, have been demanding for not increasing the tax and keep the current rate unchanged. RMG products exporters demanded that any increase in the tax would severely hamper the growth of the sector as they managed to make profit only of 2 per cent to 3 per cent on their total export proceeds while the cost of doing business has increased significantly over the last few years because of compliance cost, implementation of new wages and devaluation of the Euro in Eurozone. The revenue board on Tuesday sent a summery proposing reduction of tax at source on export to the finance minister for his approval, officials said. Muhith has already approved the proposal which will be placed before the parliament for its approval. The budget for the next fiscal year will be passed in parliament by the end of this month.
