Tax collection at source from export proceeds of major items, including apparel, rose 40 percent year-on-year to nearly Tk 1,500 crore in fiscal 2015-16. Taxmen though were not satisfied with the receipts, doubting if the proceeds to the state coffer were based on the firms’ true export receipts. “The figure should have been much higher because of the hike in the rate of source tax for the apparel sector last fiscal year,” said a senior official of the National Board of Revenue. In fiscal 2015-16, the rate of source tax was doubled to 0.6 percent for the apparel industry, according to taxmen. Besides, the 0.6 percent source tax was applicable for export earnings from terry towel, jute goods, frozen foods, vegetables, leather goods and packed foods last fiscal year. Bangladesh raked in $34.24 billion from exports in fiscal 2015-16 — the highest yet. The apparel sector accounted for $28.09 billion, or 82 percent of the total receipts, according to Export Promotion Bureau. Delays in receiving payments from importers might be one explanation for the less-than-expected figure of withholding tax collection. In this scenario, the total collection would rise in the later months, the NBR official said. “Another reason may be the leakage in deduction of tax on the export proceeds at banks — we have to increase monitoring to ensure that the withholding tax comes in properly. ”The official said the amount of source tax collected from export earnings reflects the scenario of tax receipts from export-oriented industries. “It is because the source tax imposed on the export earnings is treated as minimum and final. As a result, exporters usually do not declare higher incomes. Even though their earnings are soaring, many exporters show profits or incomes in line with the amount of tax deducted at source of their exports earnings to avoid having to pay any additional tax. “Apart from source tax, the government gets income tax from owners or shareholders of export-oriented firms. ”Taxmen said the amount of tax collection from export earning sectors is not encouraging, given the need for increased revenue to finance development expenditure. To boost receipts from export-oriented sectors, the NBR proposed slapping a 1.5 percent tax at source on export earnings from fiscal 2016-17. The bid did not get the nod in the face of demand from businesses, with the parliament imposing a 0.7 percent source tax instead, up 0.1 percentage point from the previous year. The government has set the target of shipping $37 billion worth of products in fiscal 2016-17, with the garment sector contributing $30.3 billion.
