Internet service providers want VAT to go

Internet service providers have urged the government to withdraw value-added tax on internet use for customers and declare a tax holiday for the sector for the next year.

The Internet Service Providers Association Bangladesh or ISPAB has recently submitted written proposals to the National Board of Revenue for fiscal 2016-17, where they mentioned that the government did not include the ISPs under the IT or IT-enabled services sector.

The government has declared a tax break for the IT and ITES industry but internet service providers did not get these benefits, which is surprising, said MA Hakim, president of ISPAB.

“The government is giving importance to the ICT industry to build a Digital Bangladesh, but we see a different situation for the internet segment,” he said.

In its proposal, the association said withdrawing 15 percent VAT on internet use for users is crucial to building a digital country.

Earlier, the Association of Mobile Telecom Operators of Bangladesh also placed the same demand last month in a meeting with the NBR.

There are 6.12 crore active internet connections in Bangladesh, where the mobile segment dominates. Although the ISPs have only around 30 lakh connections, they lead in data volume usage, according to ISPAB.

“VAT is the main barrier to expanding internet to all corners of the country,” Md Emdadul Huque, the association’s secretary general, said in the letter.

“We pay 15 percent VAT when we buy bandwidth from the internet gateway, and our customers pay another 15 percent VAT on bills. This fuels internet prices."

ISPAB said the government imposes 37.5 percent corporate tax on ISPs, which creates another challenge for them. The association urged the NBR to reduce the rate.

High volumes of tax are charged on importing internet equipment such as fibre optic cable, the main equipment for networking; the tax rate on that is 37.83 percent, according to ISPAB.

These are the reasons why the internet prices do not go down even though the government cut bandwidth prices several times, said ISPAB leaders.