In the budget for FY19, the Bangladesh government had set the corporate tax at 15 per cent for readymade garment (RMG) manufacturers and at 12 per cent for owners of green factories. In a bid to encourage exports, the Bangladesh government has reduced tax at source on the export of products, except jute goods, from 0.7 per cent to 0.6 per cent for the current fiscal year. In addition, the government has also reduced the corporate tax rate from 15 per cent to 12 per cent for apparel manufacturers in FY19. In the FY17, the government had set tax at source at 1 per cent for garment exports, but later cut the rate to 0.7 per cent through a Statutory Regulatory Order (SRO) due to the demands of exporters.
The tax at source rate had risen back to 1 per cent following the expiry of the SRO, but the National Board of Revenue (NBR) issued a new SRO in this regard on Monday. According to the new SRO, 0.6 per cent tax at source on all exports except jute products will be effective from July 1, 2018, to June 30, 2019. Meanwhile, the corporate tax rate for manufacturers and exporters of knitwear and woven products will remain at 12 per cent. Owners of factories which have been internationally certified as green buildings will have to pay 10 per cent corporate tax. I
“The government has decided to reduce tax at source as there were strong demands from garment manufacturers. However, the government reduced the rate for all export sectors in order to ensure a level playing field,” an NBR official said. The official added that the government had also decided to offer better incentives to exporters as it is an election year. He further said the corporate tax rate has been reduced in order to lighten the burden on apparel makers, as the Minimum Wage Board is going to increase wages. “Since the ready-made garments industry is contributing over 83 per cent to national exports and generating employment, especially for the rural women, the government has considered the demands of the sector,” a high official of the Finance Ministry said.
According to data from the Export Promotion Bureau (EPB), Bangladesh’s export earnings from the RMG sector stood at $30.61billion, posting 8.76 per cent growth in the last fiscal year. The figure is 1.51 per cent higher than the target of $30.16 million for FY18. Bangladesh’s overall export earnings rose by about 5.8 per cent to $36.66 billion in FY18, as compared to $34.65 billion in FY17.