Textile entrepreneurs are voicing concerns over Bangladesh Government’s decision to eliminate the reduced 15 per cent tax rate arguing that the industry is already grappling with ongoing gas and electricity shortages, and a higher tax rate would only worsen their struggles.
Bangladesh Government plans to eliminate the reduced 15 per cent tax rate for textile businesses in the upcoming fiscal year, moving away from tax exemptions, according to officials at the National Board of Revenue (NBR).
Under the new budget, the textile sector will face the standard corporate tax rate of 27.5 per cent. However, companies listed on the stock market will benefit from a slightly lower rate of 22.5 per cent, as per NBR officials. Additionally, a 2 per cent advance income tax (AIT) may be levied on imported raw materials like cotton and man-made fibers.
Rising costs over the past two years have significantly impacted profitability in the sector, says Saleudh Zaman Khan, Vice President, Bangladesh Textile Mills Association (BTMA). In such a situation, if taxes are increased, many businesses will find it difficult to survive, he adds.
A senior NBR official, involved in budget formulation and speaking anonymously, confirms, there are no plans to extend the reduced tax rate benefit for the textile sector that is set to expire on June 30 of this year. Hence, companies in this sector will have to pay the regular tax rate going forward. This move is part of the government's effort to phase out tax exemptions and boost revenue collection, he notes.
However, the existing reduced tax rate for RMG exporters, currently capped at 12 per cent, may be retained for another two years. These companies are entitled to benefits under the sunset clause until 2028, limiting the scope for early withdrawal.
Dr Syed Md Aminul Karim, former NBR member, states, for years, the government has allowed the textile and garment sectors to pay taxes at reduced rates. But now, it's time to gradually shift them to regular tax rates.
The BTMA represents 1,854 textile mills, with 58 of them listed on the stock market. Approximately $22 billion has been invested in this sector.
