The country's apparel makers have demanded continuation of existing rates of source and corporate taxes at least for the next five years to help the industry cope with the emerging challenges, including price fall, devaluation of local currency against US dollar, high prices of raw materials and other logistics.
The existing source tax is 0.50 per cent while the corporate tax is 10 per cent and 12 per cent for green and other garment factories respectively.
"The industry is recovering from the setback of the first phase of Covid-19 pandemic, but it is facing a number of problems like liquidity, the second wave of the pandemic and its new variants," Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said in a pre-budget proposal.
The BGMEA shared its draft proposal for the financial year 2022-23 with reporters on Tuesday and will place it to the National Board of Revenue at a meeting scheduled to be held tomorrow (Thursday).
The industry will have to invest a huge amount of money for remediation and retrofitting of factories as prescribed by the brands, it said.
As a result, it added, the industry was facing a tough time and finding it difficult to sustain competitiveness in the global market.
Though the growth in export earnings has bounced back in the recent months, the prices of the items declined by 2.22 per cent in 2021 compared to that of 2019, it said.
On the other hand, the production cost has gone up significantly due to increased prices of raw materials like cotton and chemical as well as freight and other utility charges, it said.
Besides, Bangladesh will face new challenges due to erosion of duty benefits in major markets including the EU, it said.
According to the proposals, the existing source and corporate tax rates should be continued for the next five years to help the sector face the challenges of graduation and rebound from the pandemic setbacks.
It also demanded value added tax exemption for the subcontracting factories and withdrawal of the existing 10 per cent advance income tax on cash incentives given by the government against export earnings.
"Many of the factories that don't have sufficient export orders are doing subcontracting to meet their operation costs," according to the proposals.
The factories should get VAT waiver facility as they produce 100 per cent exportable goods.
The BGMEA's other proposals included relaxation of the provision of mandatory inclusion of harmonised system of codes in bond licence in releasing imported raw materials under the bonded facilities.
The apparel makers were facing delays in releasing raw materials due to the provision of mandatory inclusion of HS codes of imported items with the bond licence and the situation is subsequently causing delays in export shipments, it explained.
The BGMEA proposed to issue a directive allowing the release of raw materials as per the description of buyers' requirements and HS codes mentioned in the utilisation declarations issued by the BGMEA.
It also proposed allowing import of industrial racking system, industrial thermostat dehumidifier and other safety equipment with a reduced tax rate to secure more global orders, arguing that the buyers are putting pressure to install the system.
