Textile millers propose reducing income tax from 27.5% to 10%

The Bangladesh Textile Mills Association (BTMA) has proposed reducing the existing income tax rate on textile mills from 27.5% to 10% until 2030 in the upcoming national budget.

The industry body made the proposal to Finance Minister Amir Khosru Mahmud Chowdhury, citing disruptions to production caused by the lingering effects of Covid, global geopolitical tensions, and the lack of uninterrupted gas and electricity supply. The BTMA also pointed to the fact that the tax rate for the export-oriented ready-made garment sector remains at 12%.

In a separate appeal, the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) has requested Finance Secretary Khairuzzaman Mozumder to waive Tk420 crore in bank loans owed by 50 of its member factories.

In 2015, the National Board of Revenue fixed a 15% income tax rate for industries involved in textile production, including yarn manufacturing, yarn dyeing, finishing, coning, fabric production, fabric dyeing and printing. That incentive was granted for 10 years and expired on 30 June last year. As a result, the tax rate on these factories rose to 27.5% in the current fiscal year, while the export-oriented apparel sector continues to enjoy a 12% rate.

In a letter signed by BTMA President Showkat Aziz Russell, the association said the current tax structure is discriminatory and undermines the competitiveness of the primary textile sector.

"As a result, the primary textile sector is facing a comparatively higher tax burden, which is discriminatory and contrary to the sector's competitiveness," the letter said.

The BTMA said the textile industry is currently facing multiple pressures, including higher gas and electricity prices, energy shortages, elevated interest rates, depreciation of the taka, reduced export incentives and growing global competition ahead of Bangladesh's LDC graduation.

It also noted that subsidised yarn and fabrics from neighbouring countries are entering Bangladesh at comparatively lower prices due to various government support measures in those markets.

According to the BTMA, more than 200 textile mills have already shut down, while most of the remaining mills are operating at only 60–70% of their production capacity, putting the sector under severe financial strain.

Meanwhile, in a letter signed by BKMEA President Mohammad Hatem, the association requested the government to classify 50 factories as sick industries and waive their outstanding bank loans.

BKMEA said the factories have struggled due to weak international competitiveness, corruption by bank officials and, in some cases, the death of business owners.

"We believe the state has a responsibility toward these institutions. Altogether, 50 factories have total principal liabilities of Tk819.85 crore with 16 banks," Mohammad Hatem said.

He said the largest share of the debt is owed to Sonali Bank, amounting to Tk233.27 crore.

The remaining liabilities include Tk20.28 crore to United Commercial Bank, Tk19.33 crore to Janata Bank, Tk16.21 crore to Pubali Bank, Tk6.5 crore to IFIC Bank, Tk1.96 crore to National Bank Limited, Tk2.8 crore to First Security Islami Bank, Tk56.5 crore to Southeast Bank, Tk3.07 crore to Rupali Bank, Tk5.57 crore to AB Bank, Tk9.63 crore to Jamuna Bank and smaller amounts to several other banks.