Dhaka, June 18, 2019: The Association of Mobile Telecommunication Operators of Bangladesh (AMTOB) at a post-budget press meet called upon the government to reconsider the budget proposal on the telecom sector, because it runs counter to the Digital Bangladesh vision.
The notable changes in the 2019 tax proposals, defined in the budget, are a) supplementary duty on services provided through mobile phone SIM/RIM card raised from 5 percent to 10 percent; b) SIM tax raised from BDT 100 to BDT 200; c) 15% tax on retained earnings for listed companies; d) minimum tax for mobile companies raised from 0.75 percent to 2 percent of turnover; and e) import duty on smartphones increased from 10 percent to 25 percent.
It was observed that the new tax policy would burden existing and new customers with additional costs. Earlier, the industry had proposed to the National Board of Revenue (NBR) for the elimination of the existing 5 percent SD on mobile services and SIM Tax. Further, the NBR was also requested to reduce the minimum corporate tax for non-profitable operators, and slash the corporate tax for listed and non-listed companies by 5 percent. AMTOB had also requested the NBR to reduce the appeal charge on any financial disputes from the current 30 percent to 10 percent.
In this backdrop, imposition of minimum tax of 0.75 percent on turnover meant that three investors were forced to pay 0.75 percent of their revenue, even though they were making a loss.
It is unfortunate that the proposal was to raise this unjust tax to 2 percent of turnover. It is widely acknowledged that the country stands at the junction of the complete implementation of the Digital Bangladesh vision thanks to the massive investment from the telecom operators. The rise in minimum tax promises to make 4G expansion and the required investment for upcoming 5G in Bangladesh uncertain.
Furthermore, imposition of 15% Tax on retained earnings has wide implications on publically listed MNCs and local conglomerates. The new tax will compel companies to pay out higher dividends to keep their reserves at minimum, thus reducing funds for future investment. Tax on retained earnings is double taxation, as listed companies already pay up to 42.5% corporate tax and the new law would be an additional 15% tax on its year end reserves.
AMTOB asserted that rather than supporting this vital industry further, the Government has decided to add to the back-breaking tax structure. “We are utterly disappointed to note that the proposed national budget has undermined the significant contribution made by the telecom industry in implementing the vision of Digital Bangladesh. Telecom industry contributes more than 6.2 percent in the gross domestic product (GDP) but there is no reflection of this fact in the proposed budget. It is widely recognized that the sector in Bangladesh is loaded with the highest tax burden in the world,” said AMTOB Secretary General, Brig Gen S M Farhad (Retd.).
The AMTOB official stressed that the proposal to raise supplementary duty from 5 percent to 10 percent has only added to the burden of all the aspiring citizens of Digital Bangladesh. Furthermore, the raising of the SIM tax from BDT 100 to BDT 200 would double the burden on new connections and SIM replacement. He added that “the industry is in the process of connecting the underprivileged segment of the society to Digital Bangladesh, in this context, slapping on this additional supplementary duty and doubling of the SIM tax will only stall the progress in attaining the Sustainable Development Goals.”
AMTOB expressed its sincere hopes that the Government would reconsider the budget proposal in favour of the industry. The industry is at the cusp of the 4th industrial revolution and will require massive investment going forward. The mobile sector is among the top contributors to the national exchequer and Foreign Direct Investment and the government should reconsider in order to infuse fresh thinking on taxation and ensure that the energy, vitality and the agility of the telecom sector can be fully utilized.