Advance income tax (AIT) deducted at source on export cash incentives is set to be halved to 5.0 per cent from the existing 10 per cent in the new national budget as a fiscal stimulus for businesses long navigating adversities.
According to finance ministry officials, the government makes to move for easing the tax burden on exporters and improving their cash flow at a time when businesses are grappling with weak global demand, rising production costs and persistent economic uncertainties.
Currently, exporters are subject to 10-percent tax deduction at source when receiving government cash incentives. Under the proposed measure, the rate will be reduced to 5.0 per cent as an immediate relief to export-oriented industries.
Officials have said the proposal forms part of a broader effort to enhance the competitiveness of Bangladesh's export sector and support businesses facing mounting challenges on the international market.
Exporters have long demanded a reduction in the tax, arguing that the existing rate raises the cost of doing business and constrains liquidity.
Talking to The Financial Express, BGMEA President Mahmud Hasan Khan Babu welcomed the move, saying it would help exporters remain competitive on the global market.
He, however, urges the government to completely withdraw the AIT on cash incentives, arguing that such incentives are a form of policy support and should not be taxed.
Referring to the source tax on export proceeds, Mr Babu requests the government to reduce the rate to 0.5 per cent from the current 1.0 per cent. He notes that the rate had previously been 0.5 per cent before being doubled and says exporters expected it to be restored to its earlier level.
The BGMEA president also says the source tax on exports should be treated as a final tax settlement.
National Board of Revenue (NBR) officials say the government would continue to assess the fiscal implications of the proposed reduction in a bid to strike a balance between revenue mobilisation and export promotion.
Currently, exporters in 43 sectors receive cash incentives and subsidies. Among them, readymade garments, diversified jute products, agro-processing and leather goods receive incentives of up to 10 per cent.
With Tk 90.25 billion allocated for export incentives in the current fiscal year, officials estimate that the existing 10-percent tax deduction could generate roughly Tk 9.0 billion in revenue. The proposed reduction may lower government revenue by around Tk 4.5 billion in the next fiscal year.
If the proposal approved by parliament, the revised 5.0-percent rate will take effect from FY2026-27.
The newly elected BNP-led government is expected to place its first national budget under the leadership of Prime Minister Tarique Rahman before the national parliament on June 11, with a proposed outlay of approximately Tk 9.3 trillion.
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