Bangladesh Cuts Corporate Tax For Garment Sector

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Bangladeshi garment makers have something to cheer for in the proposed budget, as the finance minister has reduced the corporate tax for the sector to 15% from the existing 20%. The corporate tax for green garment factories has also been reduced to 14%, as they are contributing in saving energy, water and environment. The much-talked about source tax will be 1% for the next fiscal year.

However, the budget has failed to satisfy the sector leaders, who want more benefits from the government, including establishment of more modern infrastructure and smooth operations of ports. Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters Association, said he is not happy with the proposed facilities given to the sector.

Rahman recommended the government reduce the source tax for the garment sector to zero percent, as the sector has been passing through a bad time due to volatile economic situation in the major export destinations, including the EU and the US. He also said the government should give 5% cash incentive on export receipts and set the corporate tax at 10% at least for the next two years. The garment sector has been witnessing a little above 13% growth over the last 10 years, but the growth declined to less than 3% in recent months due to global instability, he said.

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"The next two years are very crucial for us. We need policy support to maintain even a moderate growth."

Bangladesh will face even tougher competition as some of its competing countries have already taken steps to strengthen their apparel exports, Rahman said. The cost of production for the sector has been increasing at 18% annually, but at the same time the prices of apparel items are not increasing globally, and even in some cases the prices of clothing items declined, he said. Rahman said the garment makers have already spent more than $1 billion for factory remediation as per the recommendations by the Accord, Alliance and the government. Rahman said the garment makers' platform will soon sit with the prime minister and the finance minister to press home their demands.

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The proposed tax reduction for green garment factories will encourage the owners to establish more such factories, Rahman said. "The move to reduce corporate tax for green garment factories is a very good idea," said Miran Ali, managing director of Bitopi Group, which runs one of the highest rated green garment factories in Bangladesh.

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Currently, Bangladesh has 67 garment factories which have earned the Leadership in Energy and Environmental Design or LEED certificate from the US Green Building Council, the global authority for certifying green buildings. Another 222 factories are now waiting in line to be certified by the Council.      

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