The government is likely to reduce the tax at source on export from the proposed 1.50% for the next fiscal year 2016-17 in the wake of hectic lobbying from different stakeholders.
While placing the budget for FY’16-17, Finance Minister AMA Muhith had proposed to hike the tax at source on exports, including readymade garment sector by 1.50%.
The minister proposed to set the tax rate at 1.5% from existing 0.60% for the upcoming fiscal year.
Since then, leading business chambers and trade bodies have been pressing the government to reduce the tax rate or keep it unchanged at 0.60% for the next fiscal year considering the interest of exporters.
The government is now actively considering the proposal from the trade bodies, particularly for hectic lobbying by readymade garment sector, to reduce the rate although the rate is yet to be finalised, said the finance ministry officials.
According to officials, the proposed tax rate may come down due to huge resistance by different quarters but the rate will not be set below 1% considering the revenue prospects.
Earlier in FY’16, the government proposed to increase the tax at source on export proceeds to 1%, but later it was reduced to 0.60% following protests, mainly from the clothing product exporters.
According to the market insiders, local producers will lose competitive edge while the competitors will become stronger as they are getting policy support from their respective governments.
The proposed hike on tax at source will not only cast shadow on new investment but also lead the sector to face tough competitions as the prices of product would go up further, they argued.
If the proposed tax at source is implemented, it will increase production cost and reduce competitiveness in the global market, they said demanding to set source tax rate at 0.60%.
Meanwhile, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), with a revised budget proposal, requested the National Board of Revenue (NBR) to reduce the proposed tax at source on export proceeds to 0.60% from the proposed 1.5%.
As the rate is not yet finalised, Finance Minister AMA Muhith may revise down the tax rate just before passage of the finance bill by the parliament on June 29, ministry officials said.
From July to April of FY16, the revenue authorities had collected over Tk1,300 crore as tax at source from the export-oriented industries.
The government was supposed to get Tk4000 crore from the sector due to the hike in tax at source on the export, said an official quoting NBR projection.
“If reduced, it will have major impact on revenue collection,” he added.
Source: Dhaka Tribune
