The government proposed to enhance the tax at source on export proceeds of all sectors to 1.0 per cent to strong opposition from exporters and businesses.
Currently, 0.30 per cent source tax is applicable for readymade garments and 0.60 per cent for other sectors.
The rate was reduced from 0.80 per cent for just one year by considering special circumstances.
"Our textile and garment industry alongside other export items are enjoying various incentives," Finance Minister AMA Muhith said in his budget speech Thursday in proposing the tax hike.
"I, therefore, propose to withdraw the existing facilities and as such impose one-percent tax on all export items, including garments, terry towel, carton and accessories, jute and jute goods and frozen foods," he said.
The finance minister, however, proposed to consider this tax deduction at source (TDS) as final tax liability for all export sectors.
In an instant reaction, the leadership of the apex body of the apparel sector called the proposal 'suicidal'.
"The hike in source tax will create a big blow to the sector which is now passing through a crucial period following the recent political turmoil, Eurozone crisis and compliance with required workplace safety," President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Md Atiqul Islam told the FE.
The leader of the largest export sector demanded retaining the 0.30 source tax for the upcoming fiscal in view of the present scenario.
Echoing his view about losing competitiveness on the global market, Golam Mostafa, acting President of Bangladesh Frozen Foods Exporters Association (BFFEA), said the rate should be raised gradually.
The minister, however, proposed that incentives would be provided to other prospective sectors along with RMG to diversify export products and continue the incentive schemes for diversification of export markets.
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