Exporters seek cut in or scrapping of source tax on cash incentives


Exporters have demanded a reduction in or a withdrawal of source tax on cash incentives the government extends against export earnings to keep the country’s export performance competitive in the global market.

Different trade bodies have made the plea to the National Board of Revenue after the government increased the tax on export cash incentives to 10 per cent from the previous 3 per cent.

The Bangladesh Garment Manufacturers and Exporters Association has demanded withdrawal of the tax saying that cash incentives should not be subjected to the tax as the government gives the subsidy to encourage exports.

The Bangladesh Agro-Processors Association on August 4 in a letter to finance minister AHM Mustafa Kamal demanded reinstating the tax rate at 3 per cent as the tax at increased rate along with source tax on export earnings would put the sector in a tough competition in the international market.

The government in the budget for the current fiscal year (2019-2020) reinstated the 1 per cent source tax on export proceeds from reduced 0.25 per cent exporters enjoyed in last fiscal year (2018-19).

NBR officials said that they were also getting such request from individual exporters and other trade bodies of exporters.

The NBR is yet to make any decision on the issue, they said.

They said that source tax on cash incentives had been in place over the years. In 2014, the NBR reduced the tax to 3 per cent from 5 per cent.

The tax is deducted while making payment to the accounts of exporters.

The NBR will make decision on the issue as per instruction of the government high-ups, they added.

The government offers cash incentives to exporters at various rates for export performance mainly in new markets and for new and non-traditional export items to promote and diversify the country’s export basket.

In FY19, exporters enjoyed cash incentives ranging from 2 per cent to 20 per cent of their export proceeds against the exports of 35 products.