Bangladesh will increase tax at source on export proceeds from the apparel sector in the coming fiscal year. The rationale is: the sector receives a lot of benefits from the government and now it is time for exporters to give back -- at least something. The tax at source on export receipts had been reduced to 0.3 per cent for this fiscal from 0.8 per cent in the previous one.

If the rate is increased, the government feels it can collect a large amount of revenue from the sector. Day laborers and people with low income are seen to be the segments hit the hardest by inflation. The government will review subsidy allocations for different sectors, including garments. It will rationalise subsidy allocation and, possibly, there will be changes in the distribution and measures to avoid its abuse. Considering the limited resources, there will be a review of the issue of cash incentives.

Since the garment sector enjoys half of the total cash incentives, there is a feeling the thrust sectors should get these facilities. The size of the budget has increased by 18 per cent in the last five years, but real growth will be just around 10 per cent if inflation is taken into account.