Bangladesh raises source tax revenues affecting exports of ready-made garments and jute

News from June 15th that Bangladesh's increase in source taxation may affect the clothing and jute products sector, causing a drop in exports, the trade group warned yesterday. In the next two months, Bangladesh's ready-to-wear exports will decline, said Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Lobbying organizations predict that exports will decline. They say that a 1.5% increase in source tax revenue will increase 7.5% in the cuts and manufacturing of the knitwear and weaving sectors.

In the first 10 months of the current fiscal year, Bangladesh's ready-to-wear exports grew by 42.30%. But the Bangladesh Garment Manufacturers and Exporters Association said that Bangladesh’s exports may eventually decline due to high interest rates, an 80% increase in labor costs and fierce international competition.

The Bangladesh Garment Manufacturers and Exporters Association requires a 0.25% source tax, which was implemented from fiscal year 2009-10 but replaced by a 1.5% source tax in the new budget. The Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Jute Factory Association said that the requisition of a 1.5% source tax will export Shanghai to jute products. They asked the government to double its export subsidies to reach 20%.

Qiao Duri, president of the Bangladesh International Business Forum (IBFB) responsible for international affairs, said that in order to make up for the fiscal deficit, the government had to rely on domestic lending. This may lead to a liquidity crisis, causing bank interest rates to rise again. As a result, the industrial sector may not receive enough incentives. The increase of the source tax from 0.4% to 1.5% will have a negative impact on exports. At the same time, cutting agricultural subsidies may affect agricultural production, which may affect the government’s policy of self-sufficiency in food.