The proposed 1.5% tax at source for export-oriented industry would badly hit the sector especially the promising ones, like plastics industry, furniture and garment accessories manufacturers and the like, exporters say. In the proposed budget for the fiscal year 2016-17, the government has proposed to raise the tax at source on exports, including that of the garment sector, to 1.5% from 0.60%. Currently, the apparel makers and other export-oriented sectors pay 0.60% tax at source. Talking to the Dhaka Tribune, the leaders and manufactures of export-oriented industries argued that the proposed tax at source will not only cast shadow on new investment but also lead the sector to face tough competitions as the prices of product would go up further. “Plastics sector is a promising one and it is growing every fast, but 1.5% tax at source, which stands at about 20% on profits, would have the industry face big competition as the prices would go up,” Jashim Uddin, president of Bangladesh Plastics Goods Manufacturers and Exporters Association (BPGMEA) told the Dhaka Tribune. In last fiscal year, Bangladesh earned $100.50 million. In the first 11 months of the current fiscal year, it earned $81.5 million, which is 11.5% less compared to $92 million in the same period a year ago. Manufacturers will lose competitive edge in the global markets if the prices go up because of implementation of proposed tax, said Jasim. On the other hand, the expansion of existing business will be stuck and new investment would be discouraged due to fall in net profits, the exporters claimed. “In the export market, the furniture sector is a newcomer that started export a few years ago. Tax burden like tax at source will kill the potential of the emerging sector,” Selim H Rahman, chairman of Hatil, an export-oriented furniture manufacturer, told the Dhaka Tribune. In the last fiscal year, furniture exports earned $39 million. In the first 11 months of the current fiscal, the export earnings stood at $43.36 million, an $18.76 jump over $36.5 million a year ago. “Our competitors are self-reliant on raw materials, while we are import-dependent. Such a decision would leave the sector in trouble,” Rahman said, urging the government to continue tax at source at 0.6% to grow. If there is no profit, entrepreneurs will not invest for their business expansion, which would affect job creation, he added. Meanwhile, RMG sector people are apprehensive about reaching the $50 billion export target. They argued that the sector needs about 12% export growth every year, which is currently 10%, and if the proposed tax is imposed, it would hit small entrepreneurs and backward linkage. RMG accessories and packaging manufacturers are helping the apparel industry to meet lead time, supplying accessories as a backward linkage industry and making remarkable contribution to export earnings,” said Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) president Abdul Kader Khan. The sub-sector is struggling to survive due to hike in production cost and the government should not increase the rate of tax at source, rather keep it at existing 0.6%, he added. The garment accessories manufactures and exporters called on the government to keep tax at source at 0.6% for exporters in the upcoming fiscal year. In the last fiscal year, the export of accessories earned the country $5.6 billion.
