The National Board of Revenue (NBR) wants the readymade garments sector to pay taxes in line with others in coming years, and not the modest rates it has been up to now.

The readymade garment sector has grown to an annual $18 billion export industry in recent times, accounting for about 75 percent of the nation's total shipments, but its tax contribution, compared to other corporate sectors, is low.

As part of the government's efforts to develop the sector, a tax-exempt status was granted in the 1980s, which went on to last for two decades.

A small tax of 0.25 percent was imposed in fiscal 2004-05 on the sector's export receipts, which was increased to 0.4 percent in fiscal 2010-11 and finally to the 0.6 percent it currently enjoys. The government plans to raise it to 1.2 percent in fiscal 2012-13.

In contrast, other corporate sectors pay 37.5 percent taxes on profits. The NBR feels the tax rate and tax revenue from the sector should be much higher and in keeping with its earning potential.

A study conducted by the NBR found there is room to raise taxes by 5-6 times the current rate on the RMG sector's earnings.

On the basis of the study's findings, and taking other factors into consideration, the tax administering authority plans small tax increments of 0.3 to 0.4 percent every year to ultimately raise the rate to 2 percent.

This arrangement has been inveighed by the sector, which argues that the tax rise would hurt its growth.

NBR counters the argument by bringing the 40 percent growth enjoyed by the sector despite a tax rise to 0.4 percent in fiscal 2010-11 from 0.25 percent.

The sector currently comprises 5,000-odd apparel units and employs over 35 lakh people in direct jobs.

The Daily Star/Bangladesh/ 24th June 2012