The proposed rise in corporate tax will hurt the flow of fresh investment into the garment sector as entrepreneurs will feel discouraged to inject fresh funds, said the top leader of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) yesterday.

"We are passing through a tough time. So, any rise in any tax will only increase the cost of production," said Siddiqur Rahman, president of BGMEA.

"If new investment is not made, jobs will not be created,"he said, adding that the association will sit with the finance minister to demand a tax cut.

Finance Minister AMA Muhith proposed rising the corporate tax rate for the garment sector by 3 percentage points.

As per Muhith's plan, the corporate tax for non-listed garment makers will be 15 percent in the next fiscal year from 12 percent now. He also raised the rate for green garment factories to 12 percent from 10 percent.

The minister, for the first time, imposed 12.5 percent corporate tax on the listed garment companies.

"We did not know about the increase in tax. Although, the overall budget is investment-friendly, our expectation has not been fulfilled," Rahman said.

There are about 5,500 garment factories in Bangladesh, but only a handful of them are listed on the stockmarket.

In his budget speech, Muhith hinted at giving VAT exemption to the textile and export sectors. However, he did not elaborate.

He provided 100 percent duty exemption for export-oriented textile raw materials and extended the same benefit to the imports of textile raw materials such as flax fibre and flax tow.