Leaders of the country’s textile and clothing sector have urged the government to reduce the tax at source saying the industry might not survive if the proposed 1.5 per cent source tax is implemented. They also demanded regulatory reform in the existing laws to impose tax either on CM (cutting and making) or on net profit for the sector. Terming the proposed source tax ‘contradictory’ to the government’s economic development and industrialisation strategy, President of BGMEA (Bangladesh Garment Manufacturers and Exporters Association) Md Siddiqur Rahman said: “The government has proposed a 150 per cent hike in source tax to 1.5 per cent at a time when the sector is undergoing a critical time and it will hinder the usual growth of the sector.” The manufacturing sector contributes about 25 per cent to the country’s GDP (gross domestic product) growth and so such tax burden on the largest manufacturing industry is not rational, he noted. The BGMEA president was speaking at a joint press conference held on Saturday at its headquarters in the city. The BGMEA, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Bangladesh Textile Mills Association, Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA), Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) and Bangladesh Export Oriented Garments Washing Industries Owners Association (BEOGWIOA) jointly organised the conference on the proposed budget for the upcoming fiscal. Leaders from the respective associations were also present at the conference. “We put forward 10-point demands including 10 per cent corporate tax and 0.30 per cent source tax to the government but none of those has been considered in the proposed budget,” the BGMEA president alleged. Source tax is applicable on sales not on profits, he said adding that on an average, if a factory makes 3.0 per cent profit, its source tax rate would be 50 per cent which is higher than those of banks, insurance and other industries of the service sector. Cost of doing business has gone up significantly while prices of apparel products are decreasing and thus the risk factor has increased by 30 to 35 per cent, he said adding majority of the knit and woven factories might not survive if the proposed source tax is implemented. “To which issues will we give priority – investment, employment or direct tax?” he raised the question adding: “We believe that it would be rational to think about supporting industries through indirect tax.” “It will be very difficult for the factories, especially the small and medium ones whose profit margin is very nominal, to survive if the 1.5 per cent source tax is implemented,” he noted. BTMA Vice President Fazlul Hoque expressed the opinion that the proposed source tax would discourage investment and employment in the industry. Speaking on the occasion former BGAPMEA president Rafez Alam Chowdhury said: “The existing 0.60 per cent source tax is applicable at different stages of RMG (readymade garment) supply chain including direct and deemed exporters,” adding if the proposed source tax is implemented, at the end it would reach nearly 4.0 per cent. “Any impact on the RMG industry also affects the backward linkage industries,” he said adding the accessories industry would not survive if RMG could not continue to exist. The leaders demanded a 5 to 10-year-long industry and investment policy to help entrepreneurs take short and long-term decisions. A few of them demanded 0.30 per cent source tax while others opted for continuation of existing 0.60 per cent tax at source. The government has reduced the corporate tax from 35 per cent to 20 per cent in the proposed budget. The leaders however welcomed the proposal but stuck to their demand of fixing corporate tax at 10 per cent. Their other demands included 2.0 per cent and 5.0 per cent cash incentives for exports to EU and new market exploration respectively, removal of 5.0 per cent duty on safety equipment and pre-fabricated building materials, duty-free import of chemicals used in ETP (effluent treatment plan) and removing barriers that hinder the normal export activities.
