Bangladesh has retained the status of the top exporter of garment items in the UK market in consideration of quantity in the period of January–October 2023.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) revealing the UK’s import data showed Bangladesh exported 178.39 million kilogrammes (kgs) of garment items to the UK while China shipped 159.25 million kg.

In this regard, BGMEA President Faruque Hassan told UNB that considering the performance of the UK sourcing countries, China is at the top. It is followed by Bangladesh, Turkey, India, and Pakistan.

Bangladesh had secured its position as the top garment supplier in Europe in terms of volume (quantity) in 2022.

“Our position in the UK market remains the same because, in 2022, the UK's imports from Bangladesh exceeded imports from China, and this trend continues in the first 10 months of 2023,” he said.

However, Bangladesh's share of the UK's total apparel imports is 23 percent in terms of value and 28 percent in terms of volume, said Faruque.

“So far, we have been able to secure our position through potential cost savings, timely product delivery, and maintaining quality, which has kept us ahead of the competition in the fashion world,” said BGMEA President.

He said that the UK market still has opportunities as they approach the saturation point, and the global trade policy and competitive landscape will change over the coming decades. The key to capturing more global market share and sustaining growth will be to shift to higher-value products and higher-value markets by acquiring capabilities in backward and forward linkage industries.

Bangladesh can add higher value by moving into the mid-high price segment of the market, where a T-shirt or a polo shirt can fetch higher FOB revenue only because of the complex process (e.g., advanced fabrication, embroidery, printing, even functionality), he said.

Incidentally, it would also like to mention that, considering the average price of UK apparel imports, Bangladesh offers the lowest price compared to other competitors.

“Our average price is 21.39 percent lower than China, 32 percent lower than Turkey, and even 26.75 percent lower than India. This not only proves that we are not competitive in the global market, but at the same time, our absence in the mid-high price segment of the market is starkly evident. At this point, we need to strategise to capture the mid-high price segment to take the industry forward,” said BGMEA President.

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."