Garment manufacturers are worried over the proposed hike in tax at source for export-oriented industries in the budget proposal for financial year (FY) 2012-2013, saying that it will have a negative impact on the sector.
They said the proposal has come at a time when the country's highest foreign currency earning sector has been facing a tough time in recent years on labour related issues have put Bangladesh's apparel export to her single largest shipment destination at risk.
According to the budget proposal for the next fiscal (2012-2013), which was placed by Finance Minister AMA Muhith on Thursday last at the parliament, the government proposed 1.20 per cent tax at source on all types of export for the coming FY.
Apparel makers are now paying 0.60 per cent tax at source in the current FY (2011-2012).
Leaders of the Bangladesh Garment Manufacturers and Exporters (BGMEA) also requested the government to pay serious attention to the matter and reconsider the proposal to help the US$ 19 billion industry maintain growth amid the economic meltdown in the EU (European Union) region.
"Cent per cent tax hike at source on export-oriented industries like us is completely detrimental to the industry. The normal progress of the textile industry will seriously be hampered if such increase is imposed," BGMEA president M Shafiul Islam Mohiuddin told reporters in a post-budget reaction at a press conference in city.
The press conference was organised at BGMEA headquarters Friday where they made request to the Prime Minister revise the proposed tax downward.
The BGMEA president said the export of Bangladeshi garments to the global market marked a fall due to financial downturn during the last fiscal year.
Bangladesh's garment export to the EU markets has gone down by nearly 15.40 per cent while shipment to the USA has recorded a 28.40 per cent fall in the current year, the president of the country's apex apparel body said.
He has expressed his fear that the country's readymade garment (RMG) export would face difficulties in the coming months from its single largest export destination as the recent labour situation in the sector had started worrying the major American buyers.
The USA accounts for around 26 per cent of the US$ 19 billion that the industry fetched in the FY 2010-2011 out of the country's overall export earnings of US$ 23 billion.
US ambassador in Dhaka Dan Mozena in a meeting with the apparel producers last week expressed the same apprehension, saying that the present labour situation in the country's garment sector could undercut Bangladeshi RMG (readymade garment) export to the US.
Hinting at the murder of garment labour union activist Aminul Islam, he said in the meeting that six major US retailers recently shared with him the same concerns about exposing their companies' reputation to negative perceptions of developments in Bangladesh.
The BGMEA president said people think that the export-oriented industry earns 12 per cent profit. According to the budget, the industry will have to pay 10 per cent tax and 1.20 per cent tax at source. But, garments industries and factories make 0.50 to 1.0 per cent profit on its export price.
"So, apparel makers will be able to bear such a high tax burden," he added.
President of Exporters Association of Bangladesh (BAE) Abdus Salam Murshedy told the FE that the government should reconsider the proposal as it would create another hurdle for garment industry, which accounted for about 80 per cent of the country's total export earnings.
"The move also contradicts the government projection of achieving 7.2 per cent GDP (gross domestic product) growth in the proposed budget," he said.
They, however, hailed some of the government's proposed measures in the new budget to encourage industrialisation in the country.
They have hailed the government for proposing to introduce zero duty instead of the existing 1.0 per cent for importing capital machinery in an effort to boost industries.
The Bangladesh Knit Manufacturers and Exporters Association (BKMEA) Friday gave mixed reactions to the proposed budget for the next fiscal year (FY), 2012-13.
In a press release, the BKMEA leaders hailed the government for proposing zero duty instead of the existing 1.0 per cent on import of industrial equipments, and allocation of Tk 0.5 billion for skill development.
They also hailed the government for taking different initiatives, like -- raising allocation for industrialisation, education and poverty alleviation.
However, they strongly opposed the proposal of increasing deduction of tax at source from 0.6 per cent to 1.20 per cent.
They said the tax hike would hamper growth of the ready-made garment (RMG) sector, which has long been struggling due to the Eurozone crisis and other problems.
The BKMEA leaders also opposed the proposal of imposing 5.0 per cent tax on cash support the government provides to the RMG producers and exporters, saying that the cash support can never be treated as profit.
They pointed out that the finance minister in 2009 had exempted deduction of such tax, and urged him to reconsider the proposal.
They also urged the government to fix the highest 5.0 per cent interest against import of raw materials for the export-oriented factories, and bring down bank interest rate to single digit for the knit sector.
The BKMEA leaders expressed their dismay over non-allocation of incentive for the small and medium industries.