NBR withdraws spl tax rate for RMG exporters

The tax authority has withdrawn the special tax rate for apparel exporters in a bid to prevent transfer of profit from other businesses to export-oriented industries.

The National Board of Revenue (NBR) has not given extension of the tax calculation procedures from the current fiscal year.

The tenure for the special tax rate for readymade garment and knitwear exporters expired on June 30, 2014.

From 2005 to June 30, 2014, taxmen calculated tax at an estimated rate of 10 per cent at the time of annual tax assessment, officials said.

The NBR did not extend the facility in the budget for fiscal year (FY) 2014-15.

The NBR made the issue clear in a recent circular.

The exporters would fall at normal rate of tax for their export earnings, which is 35 per cent for private limited companies while up to 30 per cent for individual taxpayers.

A senior NBR official said RMG and knitwear exporters are enjoying a reduced rate of 0.30 per cent tax at source of their export earning which the taxmen consider as finally paid tax, known as final settlement, on their entire income from export.

"There are some conditions on enjoying final settlement. A taxpayer cannot enjoy a reduced tax rate as his finally paid tax for unlimited volume of income," he said.

Since July 1, 2005, apparel exporters were enjoying a 10 per cent tax rate on calculation of their income from the export sector.

From the current FY, the NBR scrapped the special rates of estimated tax calculation following allegations of shifting profits from other businesses to export-oriented industries.

Former vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem said capital volume of exporters would be reduced after scrapping the previous process.

Investment in apparel sector may be discouraged by the provisions, he added.

Earlier, exporters could show undisclosed money worth Tk 100 million by paying Tk 10 million tax.

In profit calculation from export-earning, taxmen had considered that the income of apparel exporters would fall under 10 per cent tax rate.

According to a Statutory Regulatory Order (SRO), issued in 2005, the taxmen used to calculate total income of apparel exporters assuming that the income from export earning would fall in 10 per cent tax rate.  

The SRO expired on June 30, 2014.

Under the previous rules, there was scope to show higher income from apparel export, by shifting from other businesses, in the tax file.

Taxmen smelt that a large volume of undisclosed money was whitened by taking advantage of the provision.

However, Mr Hatem ruled out such possibility saying that "There is no scope to show fabricated export earning as it is documented in bank statements."

From the current FY, taxmen would not allow the special tax rates to the RMG and knitwear exporters for their export earnings.

In April, 2014, the NBR had cut the rate of tax at source for apparel exporters to 0.30 per cent from 0.80 per cent that would continue until June 30, 2015.