The National Board of Revenue (NBR) has decided to reduce the source tax on readymade garments export earnings from 0.60 per centto 0.25 per cent following persistent demands by apparel makers to cut the tax further. NBR Chairman Mosharraf Hossain Bhuiyan told that export-oriented apparel trade bodies, including the Bangladesh Garments Manufacturers’ and Exporters’ Association, had been pressurizing the government to cut the source tax further.RMG owners have proposed the tax reduction to implement the new wage structure of workers in the readymade garments industry.It would not be possible to introduce the new wage if the tax was not reduced, they told the government. So, the tax is being cut on the basis of their understanding with the government.

The income tax wing of the NBR has already prepared a situation paper on the issue and forwarded it to the NBR high-ups for their directive. The National Board of Revenue has issued a statutory regulatory order (SRO) in this regard and sent it to the law Ministry for approval, said the NBR Chairman.NBR officials said the announcement would be made within a week if approved by the law Secretary. A gazette notification in this regard will be published soon, NBR Chairman expressed hope. Early on, the government in September cut the source tax on export earnings for readymade garments and other export-oriented sectors to 0.60 per cent from 1 per cent amid hectic lobbying by apparel makers. Garment industry affiliates are happy with the decision to reduce the source tax, saying the problems of this sector will be reduced to some extent.

Siddiqur Rahman, President of the Bangladesh Garment Manufacturers’ and Exporters’ Association (BGMEA), told that owners of small and medium factories would be in danger if the new wage structure were to be implemented. The future of many would be under threat because of an increase in costs. A new source tax rate would give them some relief, he said.Faruque Hassan, Senior Vice-President of BGMEA, told: “We will definitely feel an immediate relief, but the cost of doing business is still high. This is because now RMG owners will have to pay the source tax irrespective of whether they make profits or not. The bank will cut the amount when we receive payments from the buyer.”

The BGMEA demanded a reduction in the income tax at source on export proceeds to 0.25 per cent from the current 0.60 per cent as part of an incentive package to implement the new minimum wage for garments workers and to keep the sector competitive in the global market, said the NBR Chairman. The new wage (structure), which raised the minimum wage of RMG workers to Tk. 8,000 from the previous Tk. 5,300, is going to be implemented from December. Right after the announcement of the new wage structure, RMG owners demanded additional benefits either in the form of tax benefits or cash incentives.