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Source tax hike to drag down apparel exporters and workers alike

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has voiced extreme worry over the proposed source tax hike to 1% from 0.5% in the national budget for FY23.

BGMEA President, Faruque Hassan expressed that the face of rising inflation, mainly in the western countries caused by the ongoing Russia-Ukraine war – has affected readymade garment (RMG) export and we are already witnessing a drop in work orders. In the face of these challenges, the proposed source tax hike will severely impact the exporters and workers alike. Faruque Hassan was speaking at a meet-the-press event at a hotel in Dhaka on 13 July.

Figure: BGMEA has voiced extreme worry over the proposed source tax hike to 1% from 0.5% in the national budget for FY23.

The BGMEA President also highlighted that the recent rise in production cost due to the increase in raw material prices and transportation costs, coupled with an additional gas tariff hike has made the situation difficult.

“The govt. has been providing phenomenal support in the pandemic time and now the govt. need to realize that increasing the source tax will be a drawback in the RMG industry. As more money flow in the industry will boost the foreign currency, the better wage for workers and create new job opportunity.”

He elaborated that a lot of apparel factories are reeling from the COVID impact. Whereas, the increased source tax will seriously hurt them and the wider industry.

“The World Bank, in its latest Global Economic Prospects report on June 6, predicted that the global economic downturn is intensifying due to rising inflation, unemployment and stagnant demand. In this context, we do not see any sign of the current growth in garment exports. Rather, the World Bank report says that in 2021, world trade growth was 10.3%, it will come down to 4% in 2022,” Faruque Hassan added.

“As well as the collection of industrial raw materials, increase in container rent, increase in the price of diesel, the overall production cost has increased by an average of about 40% in the last 5 years. And the recent rise in gas prices has pushed production costs even higher.”

“On top of it, the govt. must realize that it can collect more tax by not increasing source tax – rather offering more benefit to the main economic backbone i.e. RMG industry, of the country. The growth will ensure more monetary circulation in the country. On top of it, if the govt. increases the source tax – it will create a ripple effect across the whole industry.”

“So we think, in the current context, the source tax of the garment industry will be kept as it is now for the next 5 years.”

The apex trade body of Bangladesh’s garment manufacturers also noted that the non-cotton segment needs special benefit as well in the budget as Bangladesh’s share in manmade fiber is only 5%. Faruque Hassan urged the govt. to provide policy support for the manmade fiber industry.

“To boost our investment in the sector, kindly remove 10% tax on cash incentive – as the cash incentive is not a source of income.”

He said that solar panel is an essential element for green factories. And requested the finance ministry not to impose a duty on this.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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