Bangladesh’s textile millers have urged the government to slash corporate income tax from 27.5% to 10%, warning that mounting costs, energy shortages and shrinking competitiveness are pushing the sector into crisis ahead of the next national budget.
The proposal, submitted by the Bangladesh Textile Mills Association (BTMA), calls for the reduced tax rate to remain in place until 2030, as the industry grapples with what it describes as “severe financial strain” across the primary textile segment.
The move comes as Bangladesh prepares its FY27 budget, with policymakers balancing revenue pressures against growing demands from export-oriented industries that underpin the country’s economy.
BTMA leaders argue that the current tax structure disproportionately burdens textile mills compared with the ready-made garment (RMG) sector, which continues to enjoy a significantly lower tax rate of around 12%.
“The primary textile sector is facing a comparatively higher tax burden,” the association said in its proposal, describing the system as discriminatory and harmful to competitiveness.
The tax hike follows the expiration of a decade-long incentive in June 2025, when the corporate tax rate for textile producers rose from 15% to 27.5%, sharply increasing operating costs across spinning, weaving and dyeing units.
Industry insiders say the timing could not be worse.
Textile mills are already contending with rising gas and electricity prices, irregular energy supply, higher borrowing costs and a depreciating currency, all of which have eroded profit margins.
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Global pressures are also intensifying, with subsidised yarn and fabric from regional competitors entering Bangladesh at lower prices, while local producers face declining export incentives and uncertainty ahead of the country’s graduation from least developed country (LDC) status.
The consequences are becoming visible across the industry.
According to BTMA, more than 200 textile mills have already shut down, while many of the remaining factories are operating at only 60–70% of capacity.
Earlier industry estimates suggest that a large share of mill owners are operating at losses, with some considering selling off assets or exiting the sector entirely as costs outpace returns.
The crisis in the primary textile sector has broader implications for Bangladesh’s export economy, particularly its $40 billion-plus garment industry, which relies heavily on locally produced yarn and fabrics.
Industry leaders have repeatedly warned that weakening backward linkage industries could increase dependence on imports, raise production costs for garment exporters and undermine Bangladesh’s competitive edge in global apparel markets.
In parallel with the tax cut proposal, the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) has sought relief measures including the waiver of Tk420 crore ($38 million) in bank loans for 50 struggling factories, highlighting mounting financial stress across the broader textile and apparel ecosystem.
The requests underscore growing tension between industry groups and policymakers over fiscal priorities, as the government seeks to boost revenue collection while businesses call for support to navigate a challenging global environment.
Economists say the outcome of the tax debate could shape the future trajectory of Bangladesh’s industrial base.
A significant reduction in corporate tax could provide short-term relief and improve cash flow for struggling mills, but may also weigh on government revenues at a time when fiscal space is already constrained.
For now, textile millers are pushing for urgent action.
Without policy support, industry leaders warn, the sector risks further contraction — with potential ripple effects across employment, exports and the broader economy.
As budget negotiations intensify, the government faces a difficult choice: maintain fiscal discipline or extend relief to one of the country’s most critical export-linked industries.
