BUDGET FY 2021-22: Garment accessories producers demand lower source, corporate taxes

Exporters of garment accessories and packaging products yesterday urged the government to set the tax at source at 0.25 per cent and corporate tax at 12 per cent for the next fiscal year to help the sector tackle the economic fallout of the pandemic.

Currently, the apparel accessories makers have to pay 0.5 per cent source tax and 32.5 per cent corporate tax.  

Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), a platform of backward linkage industries crucial for the apparel industry, made the call in its budget proposal for fiscal 2021-22 to the National Board of Revenue (NBR).

The proposal will be discussed with the sector people on Wednesday at a meeting presided over by the NBR chairman.

“The pandemic has severely impacted the country's apparel sector and as a backward linkage industry, we also suffered,” Abdul Kader Khan, president of BGAPMEA, told Dhaka Tribune.

On the other hand, the prices of raw materials went up sharply but the global buyers are not adjusting the prices of finished goods accordingly, which is still rubbing salt on exporters' wounds.

"We are suffering from fund scarcity in running the factories. Moreover, we did not get the desired funds from the government's stimulus package offered for the apparel sector to pay workers' wages," Khan said.

Amid the ongoing crisis, the sector needs government policy support to turn around.

“We are earnestly requesting the government to set source tax at 0.25 per cent instead of existing 0.50 per cent, as well as to reduce corporate tax to 12 per cent instead of 32.5 per cent for the next fiscal year.”

In line with the country's export-import policies, direct and deemed exporters are entitled to enjoy equal facilities. 

“But our corporate tax rate is higher than others,” Khan said.

Since the last national budget, garment exporters enjoy 12 per cent corporate tax, which is 10 per cent for apparel manufacturers with certified green factories. But the accessories exporters have to pay 32.5 per cent corporate tax.  

According to BGAPMEA data, there are more than 1,700 small and medium accessories and packaging makers, who are capable of providing 95 per cent of the demand for accessories products to the country’s $28 billion apparel industry and other export-oriented packing industries, including frozen foods and pharmaceuticals.

In fiscal 2019-20, the sector contributed over $5 billion to the exports of the apparel sector, of which nearly $1 billion came from the direct export of accessories goods.