The National Board of Revenue (NBR) is reportedly planning to increase the corporate tax rate for the ready-made garment (RMG) sector from 12 per cent to as high as 20 per cent in the upcoming fiscal year, according to sources familiar with the matter. This proposed change comes at a challenging time for the apparel industry, particularly in light of the Trump administration’s recent imposition of a 37 per cent reciprocal tariff on Bangladeshi products entering the US market.
An anonymous NBR official explained the rationale behind the potential tax increase, stating, “The garment sector has long benefited from tax incentives. Due to pressure from the International Monetary Fund (IMF), we need to enhance revenue collection and address disparities in corporate tax rates across various sectors.”
Under the proposed plan, the NBR aims to implement a corporate tax rate of 20 per cent for the RMG sector, with a slightly lower rate of 18 per cent for green factories. However, the official noted that the proposal is still in its preliminary stages and will require approval from the finance adviser and the chief adviser before being finalized in the next budget.
Industry leaders have expressed concerns about the potential tax hike. Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), criticised the proposal, stating, “We are baffled by the bureaucratic decision to raise taxes instead of focusing on improving their operational capacity. The calculation of tax is based on profit, and our source taxes have not been adjusted accordingly.”
Hatem further lamented that the tax increase could exacerbate the challenges faced by the industry, particularly in light of the US tariffs, suggesting it might be part of a broader strategy to undermine the Bangladeshi apparel sector in favor of competitors like India.
Faruque Hassan, the former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), highlighted that the current corporate tax rates were established until June 2028, and any abrupt changes could violate the Government’s commitments made to investors. He also emphasised the impact of rising shipping costs due to the cancellation of transshipment by India, which further complicates the industry’s logistics.
Mashrur Reaz, founder and chairman of Bangladesh Policy Exchange, acknowledged the NBR’s intention to rationalise tax holidays for fiscal policy strength but cautioned against making such changes at this critical juncture. “The RMG sector is already under significant pressure from inflation, increased financing costs, and wage hikes. Given the additional burden of high tariffs in major export markets, this is not the right time for tax adjustments,” he stated.
Reaz urged that any phase-out of tax holidays and reduced rates should be implemented gradually, allowing affected sectors adequate time to adapt to the changes.
