The Bangladeshi government is poised to eliminate the long-standing 15% reduced corporate tax rate for the textile sector in the upcoming fiscal year, shifting the industry to the standard 27.5% corporate tax rate, according to sources within the National Board of Revenue (NBR). This move comes as part of a broader policy to phase out tax exemptions and strengthen domestic revenue generation.
While stock market-listed textile firms will benefit from a slightly lower 22.5% rate, the change is expected to put significant pressure on an industry already grappling with energy shortages and rising operational costs.
Textile manufacturers warn that removing the tax break could be devastating. “Profitability in the sector has already eroded due to energy crises and increased costs,” said Saleudh Zaman Khan, Vice President of the Bangladesh Textile Mills Association. “A tax hike under current conditions may force many companies to shut down.”
Further compounding industry concerns is the proposed imposition of a 2% advance income tax (AIT) on key raw material imports such as cotton and man-made fibers. Even with the ability to adjust for the existing 1% source tax on export turnover, industry insiders argue that their effective tax burden could surge to over 60% — a potentially crippling level for businesses operating with profit margins as low as 3%.
According to the NBR, the reduced rate for textile firms is scheduled to expire on June 30, 2025, with no plans for renewal. However, the readymade garment (RMG) sector’s preferential tax rate of 12% (or 10% for green factories) may be extended for two more years due to protections under a sunset clause valid until 2028.
Former NBR member Dr. Syed Md Aminul Karim supports the policy shift but advocates for a profit-based taxation model, suggesting that companies should be taxed according to their actual earnings rather than on fixed turnover percentages.
The textile sector, with an estimated $22 billion in total investment and 1,854 BTMA-registered mills (including 58 listed firms), is a major contributor to both export revenue and domestic employment. However, only $1 billion of its turnover is derived from the local market, making it highly sensitive to international competitiveness and input costs.
Industry leaders fear that without targeted fiscal support or a more nuanced tax structure, the removal of reduced tax benefits could accelerate business closures and undermine one of Bangladesh’s most vital manufacturing sectors.
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