The country’s garment accessories manufacturers have called for a reduction in source tax on export earnings to 0.5 percent from the existing 1 percent in the upcoming FY2026–27 national budget, citing growing financial strain and competitiveness challenges.
The proposal has been submitted to the National Board of Revenue by the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association.
Industry leaders say the current 1 percent source tax is comparatively high and is tying up working capital for export-oriented firms. This, they argue, is disrupting production and slowing down business operations.
They believe that lowering the tax rate would ease liquidity pressure, improve cash flow, and help accelerate export activities at a time when global competition is intensifying.
The association has also proposed that the reduced 0.5 percent rate be treated as a final tax for the next five years. According to BGAPMEA, this would simplify compliance without significantly affecting government revenue, as source tax is already adjusted during final assessments.
Manufacturers warn that Bangladesh’s transition from a least developed country is gradually reducing access to export incentives, making it harder to compete in international markets. In this context, tax relief is seen as crucial to sustaining export momentum and foreign currency earnings.
They also highlighted broader financial challenges, including liquidity shortages in the banking sector, a persistent dollar crisis, and rising borrowing costs. These pressures are particularly severe for small and medium enterprises, many of which are struggling to stay afloat.
Beyond export taxation, BGAPMEA has proposed raising the tax-free income threshold for individuals from Tk 350,000 to Tk 400,000. The move, they say, would encourage compliance and expand the tax base.
The association further recommended cutting the source tax on interest or profit from corporate savings and fixed deposits from 20 percent to 10 percent to promote bank investment and ease liquidity constraints.
In addition, they urged the withdrawal of the 15 percent VAT on locally sourced raw materials used by export-oriented industries. While imported inputs often enjoy VAT exemptions, locally purchased materials remain taxed, creating what they describe as an uneven and unfair cost structure.
Removing this VAT, they argue, would lower production costs and support uninterrupted export operations without significantly reducing government revenue.
BGAPMEA also called for updating the definition of “deemed export” under the VAT and Supplementary Duty Act, 2012. The proposed changes aim to align the law with modern trade practices by including a wider range of commercial documents and transaction methods.
According to industry insiders, these reforms would simplify procedures, enhance efficiency, and make export operations more dynamic.
Entrepreneurs in the sector believe that adopting these measures will strengthen competitiveness, boost export growth, and deliver a positive impact on the overall economy.