The National Board of Revenue (NBR) has reduced withholding tax on the total proceeds from exports for all items to 0.6 per cent in the face of demands from entrepreneurs, particularly apparel makers. Exporters, except jute goods makers, paid 0.7 per cent withholding tax on their proceeds in fiscal 2017-18 ending on June 30. Jute goods makers have been paying 0.6 per cent advance income tax and the benefit is scheduled to expire on June 30 next year. The latest cut on source tax will also expire on June 30, 2019, according to a notification of the NBR issued at the end of last week. With a view to raising revenue collection, the source tax for clothes manufacturers and exporters of other products including leather goods, frozen and packed foods and vegetables was increased to 1 per cent in the budget for fiscal 2018-19.

“We have reduced the withholding tax rate on exports in line with their demand and considering the garment sector’s contribution to employment generation,” said Kanon Kumar Roy, NBR member for tax policy. He said revenue collection from exports would decline because of the discounts. But the loss would be offset if export earnings rise. “We want our export earning sectors to do better,” he said. Exporters fetched $36.61 bn last fiscal year, posting 5.81 per cent year-on-year growth. Garment and knitwear makers earned $30.61 bn, which was 83.5 per cent of the total export receipts for the year, according to data from Export Promotion Bureau.

The tax authority also reduced corporate tax rate for garments and knitwear makers by 3 percentage points to 12 per cent for fiscal 2018-19 from 15 per cent imposed at the beginning of the current fiscal year. The two major export earning sectors were enjoying 12 per cent corporate tax in fiscal 2017-18. Green factories had to pay 10 per cent tax on their incomes last fiscal year. The NBR maintained the rate for the current year. Latest data on collection of source tax from exports is yet to be made available from the NBR. In fiscal 2015-16, the tax authority logged in Tk 1,484 cr as source tax mainly from garment shipments. The NBR got the highest amount of source tax from exports in fiscal 2013-14, when Tk 2,080 cr was collected, according to its annual report.