Bangladesh’s leather industry has urged major tax reforms ahead of the FY27 national budget, seeking relief on imported inputs to remain competitive in global markets.
Industry bodies—including the Bangladesh Tanners Association and the Bangladesh Finished Leather, Leathergoods and Footwear Exporters Association—presented their proposals during pre-budget talks with the National Board of Revenue.
They called for full VAT and duty exemptions on 43 categories of essential chemicals used in leather processing, along with a reduction in import-stage VAT from 15% to 7.5%. The groups also requested the removal of a recently imposed 3% source tax on raw leather, warning it could disrupt a supply chain dependent on perishable materials.
The leather sector, Bangladesh’s second-largest export earner after garments, relies heavily on imported chemicals and machinery. Industry leaders say combined taxes—including customs duties, VAT, and advance income tax—can exceed 30%, significantly raising production costs.
Manufacturers warn that rising costs are weakening Bangladesh’s position against competitors like India, Vietnam, and Indonesia, where more favorable tax policies keep input costs lower. Exporters report that this disadvantage is already affecting growth in higher-value leather goods and footwear exports.
In addition to tax reforms, industry representatives have proposed VAT exemptions on utilities such as electricity, water, and fuel for export-oriented factories to align with global best practices.
While policymakers must balance revenue concerns with growth objectives, industry leaders argue that tax relief would boost exports, improve compliance, and generate higher long-term revenue.
As Bangladesh aims to diversify beyond the ready-made garment sector, the government’s response to these proposals will be key to positioning leather and footwear as major future export drivers.
