BGMEA, BKMEA demand no increase in tax at source

Leaders of the BGMEA and the BKMEA on Friday said a proposed increase in tax at source to 1.2 per cent from the existing 0.6 per cent on export of garment products for the next financial year would be an impediment to the garment sector growth.

‘If the proposed rate is imposed on garment exports, the expected growth of the sector will be held back,’ said Bangladesh Garment Manufacturers and Exporters Association president Shafiul Islam Mohiuddin at a press briefing on the proposed budget for FY 2012-13 at the BGMEA Complex in the capital.

He said, ‘We demand that the government will not increase the tax at source on export of garment products.’

The finance minister, AMA Muhith, on Thursday proposed in his budget speech in parliament that the tax at source should be raised to a flat 1.20-per cent on all kinds of export goods from the next financial year from the existing rate of 0.60 per cent to 0.70 per cent.

Shafiul Islam said the tax at source at 1.2 per cent on export of garment products would be too high.

The BGMEA earlier demanded to decrease the tax at source to 0.40 per cent from 0.60 per cent, but, on the contrary, the government proposed to increase the rate, he said.

He said, ‘We are now facing an export crisis due to the current economic woes in Europe and USA. The country’s export of garment products has decreased by 15.40 per cent and 28.40 per cent to European Union and USA respectively in the last quarter (October to December) of 2011.’

Under the circumstances, if the proposed tax at source is not lowered, the garment sector would face a stern situation, he said.

BGMEA president said the government set GDP growth rate at 7.2 per cent for the next financial year, but the increase in tax at source would be contradictory with the GDP growth projection as the entrepreneurs would be reluctant to expand their business in the export-oriented field.

He said the GDP growth might be hampered as around 25 per cent of the growth came from the manufacturing sector in last few years.

‘So, I request the prime minister and the finance minister to reconsider the move.’
He also demanded that the government would ensure bank loans for the manufacturing sector with a tolerable rate of interest.

‘We will face hurdle at the international market if the high rate of interest of bank loans persists in the next financial year,’ he said.

BGMEA president said the proposed budget maintained incentive packages on export goods for the coming financial year and the step was a good one for the export sector.

‘We request the government that the incentives should be kept at 5 per cent for FY 2012-13, at 4 per cent for FY 2013-14 and at 3 per cent for FY 2014-2015,’ he said.

The BGMEA leaders, however, expressed their satisfaction as the government proposed a complete withdrawal of the value-added tax on the industrial spaces and infrastructures.

They said the proposed withdrawal of the existing one per cent tax on capital machinery of export-oriented industries under statutory regulatory order also a good move.

They welcomed the government’s move for keeping a fund of Tk 200 crore to set up effluent treatment plants for the industrial sector.

BGMEA vice-presidents Md Siddiqur Rahman and Faruque Hassan attended, among others, the briefing.

The Bangladesh Knitwear Manufacturers and Exporters Association, in a news release, said the proposed rate of tax at source would put a negative impact on the country’s garment industry.

The association demanded that the government should lower the rate.

The BKMEA also demanded withdrawal of proposed tax on cash incentives.

News Source: 
The New Age