Textile Industry Leaders Demand Tax Reversal, Warn of Industry Collapse

Leaders of primary textile mills have expressed serious concerns over the imposition of 2% advance income tax (AIT) on cotton imports, warning that the new tax will have a crippling effect on the industry already burdened by high energy costs, labor expenses, and declining export incentives. They have also urged the interim government to reset the 15% corporate tax until 2028. The industry leaders fear that the new tax will render the industry less competitive compared to its regional peers and may lead to a significant increase in the effective corporate tax rate for textile mills.

Key Takeaways:

• The 2% advance income tax (AIT) on cotton imports will have a crippling effect on the industry, which is already burdened by high energy costs, labor expenses, and declining export incentives.
• The effective corporate tax rate for textile mills could rise from 27.5% to nearly 59% as a result of the new tax structure.
• The industry leaders have urged the interim government to reset the 15% corporate tax until 2028.
• The new tax will compel textile mill owners to import yarn from India rather than buy from local mills.
• The added costs will lead to a significant increase in production expenses, making it difficult for domestic textile mills to survive.

Statistics:

• 2% advance income tax (AIT) on cotton imports.
• 27.5% effective corporate tax rate for textile mills currently.
• 59% effective corporate tax rate for textile mills if the new tax structure is implemented.
• Tk5 per kg tax exemption demanded on cotton yarn, synthetic fibers, and other fibers produced by domestic textile mills.

Sources:

• BTMA VP Abdullah Al Mamun
• BTMA President Showkat Aziz Russell
• Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice-President Amal Podder
• Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA) Chairman Hossain Mehmood
• Bangladesh Cotton Association adviser Mohammad Ayub