Bangladesh leather industry exports, despite their potential, have yet to reach their full capacity. One of the hurdles is the country’s struggle to penetrate certain markets due to the absence of a globally recognized Leather Working Group certificate, which signifies environmentally friendly production practices. Moreover, Bangladeshi leather goods often face lower pricing in existing export destinations.
Recently, following the government’s reduction of cash incentives for export products in late January, incentives for the leather sector were entirely eliminated. However, there’s now speculation that the government might slash export taxes—a move warmly welcomed by leather goods exporters.
Tipu Sultan, managing director of Bengal Leather Complex Limited and former president of the Bangladesh Finished Leather, Leathergoods, and Footwear Exporters’ Association, expressed optimism, stating, “Our sector has faced dire straits after the abolition of cash incentives. A reduction in export taxes in such circumstances would provide much-needed relief.”
In the fiscal year 2022-23, Bangladesh exported leather and leather goods worth $1.25 billion, a slight decrease of 2% from the previous fiscal year, according to the Export Promotion Bureau. During this period, taxes exceeding Tk130 crore were levied on exports at a 1% rate.
However, in the initial eight months of the fiscal year 2023-24, export earnings from leather products amounted to $713 million, marking a 14% decline compared to the same period last year. Tax revenue from these exports stood at over Tk75 crore.
Meanwhile, on March 4th, the National Board of Revenue (NBR) issued a Statutory Regulatory Order (SRO), stipulating that export sectors with taxes below 12% could qualify for reduced tax rates upon providing evidence.
Presently, all exports, including garments, are taxed at 1% of their value. However, companies are subject to a year-end income tax rate of 12%, except for green factories and the jute sector, which enjoy a 10% rate. Some sectors, such as those benefiting from tax holidays, have even lower rates.
Despite this, a uniform 1% tax is applied to exports across all sectors. A senior official of the NBR’s tax wing stated, “Those paying 1% tax on exports but fall below the 12% threshold will be eligible for a proportionally lower tax rate upon submission of proof.”
In summary, the potential reduction in export taxes signifies a positive step for the leather industry in Bangladesh, offering hope for rejuvenation and enhanced competitiveness in global markets.
