Garment and textile leaders say taxes on incentives, subcontracting, cotton imports and energy inputs are weakening export competitiveness at a difficult point for Bangladesh’s largest foreign-exchange earner.
Bangladesh’s apparel and textile industry has urged the National Board of Revenue to ease several taxes in the FY 2026–27 budget, warning that current levies are reducing the effectiveness of export support just as factories face higher finance, energy, raw material and transport costs. The demands were presented to NBR chairman Abdur Rahman Khan by major trade bodies including BGMEA, BKMEA, BTMA, BTTLMEA, BGBA and accessories and packaging manufacturers.
Incentives under strain
The strongest demand was the withdrawal of the 10% income tax on export incentives. BGMEA president Mahmud Hasan Khan Babu said exporters were struggling with rising bank lending rates, persistent energy shortages and higher input costs, while incentives introduced to keep Bangladesh competitive had been gradually reduced since 2023. BTMA president Showkat Aziz Russell argued that taxing cash incentives weakens their core purpose: encouraging exports and generating foreign exchange.
BKMEA president Mohammad Hatem said the support was already limited, and tax exemption would allow exporters to use incentives more fully, improving competitiveness, employment and export growth, with only a marginal revenue impact.
Subcontracting and input costs
RMG manufacturers also called for removal of the 5% withholding tax on payments to subcontracting firms, arguing that exporters already pay 1% tax at source on export proceeds, making the subcontract levy a form of double taxation. They also sought withdrawal of 15% VAT on subcontracting and a reduction in corporate tax for subcontracting factories to 12%, in line with the RMG sector, from the current 27.5–30%.
The industry also sought a cut in tax at source on exports to around 0.6% from 1%, lower tax on industrial cotton imports to 0.5%, and reduced tax on raw material supply to 0.5% from 3%.
Energy and compliance priorities
Energy shortages featured prominently. Manufacturers demanded a unified 1% total tax incidence on imported solar equipment, compared with current rates ranging from 28.73% to 61.80%, and abolition of LPG-related consumer taxes. BKMEA also requested VAT withdrawal on recycled fibre and yarn to encourage circular-textile investment.
The NBR’s response suggests relief may be conditional on tighter compliance. Khan said the agency is expanding automation, risk-based audits and QR-code monitoring to reduce evasion and broaden the tax base. The next test is whether Bangladesh can design a budget that protects revenue without weakening the export sector that finances much of the country’s external account.
