Bangladesh has been ranked as the top source of knitwear, one of the two major for the European Union (EU) markets for the first time.

The robust performance can be attributed, in part, to strategic investments in higher value-added items, particularly in the active-wear segment.

Recent data from the European Union's statistics agency, Eurostat, showed that Bangladesh has secured its position as the leading source of knitwear for the EU during the period of January to September 2023, said Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), according to a press release.

Bangladesh’s knitwear imports to the EU surpassed those of any other country, both in terms of dollar value and weight, he said.

Over the nine-month span, the EU imported knitwear, which is one of the two major components of the worth a staggering US$ 9 billion from Bangladesh, outpacing the imports from China, which stood at US$ 8.96 billion. Additionally, in terms of weight, Bangladesh exported 571 million kilogramme (KG) of knitwear to the EU, compared to China's 442 million KG. This significant achievement underscores Bangladesh's dominance in the European knitwear market, said the BGMEA president.

The country's duty-free, quota-free access to the EU for most products, under the Everything But Arms scheme, has undoubtedly contributed to the country's competitive edge in the European market.

Despite the impressive volume and weight figures, it is worth noting that in terms of overall clothing imports, China still holds the lead, with the EU importing 1.33 billion kilograms of clothing from Bangladesh and 1.31 billion kilograms from China in 2022, said Faruque.

Bangladesh's success extends beyond knitwear, as it also stands out in other apparel categories. Notably, Bangladesh has been the global leader in EU denim sourcing since 2014, followed by Turkey and Pakistan. In 2020, Bangladesh topped the list of sourcing countries for denim in the USA, surpassing Mexico by a significant margin, the release also said.

While the nation briefly lost its top spot in cotton apparel exports to the USA to Vietnam in the second half of 2023, Bangladesh remains a formidable player, securing a 14.55% share of the US cotton apparel market valued at US$ 47.50 billion in 2022. Industry insiders are optimistic that Bangladesh will reclaim its position in the cotton apparel category in the US market by the end of the next year.

The success in the EU knitwear market and other apparel categories solidify Bangladesh's standing as a major player in the global textile industry, with strategic investments and favorable trade schemes propelling the nation to new heights in the competitive international marketplace, added the BGMEA president in his statement circulated in the press.

MSH

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."