The recent Bangladesh Budget has proposed raising the corporate tax rate on manufacturers and exporters of readymade garments (RMG) to 15 per cent from 12 per cent. If any such taxpayer is a public limited company, then the rate will be 12.5 per cent. Any factory holding green building certification will enjoy tax rate of 12 per cent, according to the Budget proposals.

A 5 per cent value-added tax (VAT) on branded garment outlets has also been proposed instead of 4 per cent. Besides, a 5 per cent VAT will also be applicable on sale of non-branded garments in the local market.

The Exporters Association of Bangladesh (EAB) has, however, demanded reduction in the proposed corporate tax for the RMG industry by 5 per cent and to fix it at 10 per cent. It also wants the government to cut the tax at source at 0.25 per cent instead of the existing 0.70 per cent for at least five years, according to a report.

The EAB said in a statement that the proposed tax at source of 1.0 per cent for the RMG industries, instead of the existing 0.70 per cent, to be made effective from July 1 this year would make the usual operations of the export-oriented RMG industries stagnant and thus reduce the capacity of the industries.

The Fashion Entrepreneurs Association of Bangladesh (FEAB) has opposed the proposal to increase VAT on the apparel items of local brands in the proposed Budget as the step would pose a serious threat to the local apparel industry that engages marginalised people.