Exporters will face 0.5 percent tax at source of their export earnings from the next fiscal year as the existing 0.25 percent tax benefit is set to end this fiscal year, according to tax proposals placed by Finance Minister AHM Mustafa Kamal for the 2020-21 fiscal.

However, existing reduced corporate tax benefits for garments and knitwear sectors have been extended for two years to 2022 as the benefit will expire on June 30 this year.

Apparel makers, who account for more than 80 percent of the country's export earnings, currently enjoy 12 percent corporate tax on incomes, nearly three times less than the current corporate tax of 35 percent for non-listed companies.

The rate of corporate tax is 10 percent for holders of green building certificates.

Taxpayers in the garments sector would be benefited from the measure, Kamal said in his budget speech placed at the parliament today.

The move comes at a time when the worst ever recession since World War 2 -- due to the Covid-19 pandemic -- shattered global demands, leading to dip in earnings from shipments from Bangladesh.

Export receipts plunged 18 percent year-on-year to $31 billion in July-May of the current fiscal year from that a year ago.

However, shipments trebled to nearly $1.5 billion in May from just over half a billion in April this year, according to Export Promotion Bureau data.

Income tax law stipulates that exporters pay a 1 percent source tax on the proceeds of their exports. But the NBR cut the rate through notifications on several occasions during the past two years in the face of demands from exporters.

The NBR reduced source tax on export earnings of garment twice in fiscal 2018-19 -- from 1 percent to 0.60 percent in September 2018 and further to 0.25 percent in January the next year -- following pleas from garment makers.

As 1 percent rate of source tax on exports became effective at the beginning of this fiscal year in July 2019, the NBR slashed the rate to 0.25 percent later in October and said the privilege would expire on June 30, 2020.

The official said changes have been brought in the income tax to fix the source tax rate for exporters at 0.5pc from the next fiscal year with the objective to enable entrepreneurs to do long-term planning.