The government is being deprived of an annual revenue income of Tk 100 crore as pay channel businesses remain unregulated, while some cable operators allegedly remit money abroad for using devices smuggled in from India.
Leaders of Cable Operators' Association of Bangladesh (Coab) say they have 3,200 members who connect 2.5 lakh households across the country. But businesses and experts estimate that only Dhaka and Chittagong have over 10 lakh customers of pay channels.
This estimate is substantiated by national media survey 2002 by The Communication Initiative Network that says 83 percent people of 15-49 age group in urban areas and 50 percent in rural areas watch television.
A few cable operators even admitted they declare less number of households connected with channels to evade taxes. They claimed they have to do this as the government has not addressed the issues that increase their business costs.
As per the government rules, cable operators charge each customer Tk 300 and pay 15 percent VAT (value added tax). On the other hand, distributors of channels pay the government 32.25 percent VAT and supplementary duty.
Considering taxes and duty payable by operators and distributors, the government is supposed to get around 40 percent of the money collected by operators. This means if the operators collect Tk 30 crore from 10 lakh subscribers, the government is supposed to get Tk 12 crore a month and Tk 144 crore a year.
But considering 2.5 lakh connections, the government does not get more than Tk 3 crore or 40 percent of Tk 7.5 crore per month.
According to the National Board of Revenue (NBR), it collected Tk 2.4 crore as VAT and supplementary duty from the cable operators and pay channel distributors in 2006-07 fiscal year. This amount will slightly increase in current fiscal year, an NBR official said.
"Dodging the taxes is possible because the government does not have a mechanism to estimate the exact number of connections, though Coab declares it to be 2.5 lakh," says a pay channel distributor.
Contacted, Coab President SM Anowar Parvez said there might be cases that cable operators may declare the pay channel connections less than the actual number. But the government should not play dual role about the matter, he added.
"The government directed cable operators to charge each client Tk 300 monthly, but it did not fix our purchase rate from the distributors. We have to pay around Tk 280 to Tk 290 to distributors against each connection," he said.
On the other hand, as per the VAT rules, the end users pay VAT, but farcically the government directed the cable operators to collect Tk 300 including VAT from each client, he said.
"We have our network and office expenses. We have to survive on the business," he added.
Coab repeatedly asked NBR and the finance ministry to allow cable operators to submit VAT by themselves, but none has responded to the appeal, Anowar Parvez said.
"I believe allowing operators to directly submit VAT would increase the amount of government revenue."
Meanwhile, cable operator Syed Habib Ali said operators following the government rules are subject to loss, as they have to subscribe package system to purchase channels from distributors.
"As per the government rules, the cable operators should collect Tk 300 from each client in Dhaka and Chittagong for 30 pay channels, Tk 250 for 25 pay channels in Rajshahi, Khulna, Sylhet, Barisal, Jessore, Pabna, Kushtia, Rangpur, Bogra, Dinajpur, Rangamati and Tangail," he said.
On the other hand, charge in other district towns for 15 pay channels has been fixed at Tk 200 and in upazilas the rate is Tk 150 for 10 pay channels, he noted.
"This means we do not have our choice to subscribe less number of pay channels than the number fixed by the government from distributors. This has resulted in an increase in our cost."
Another component for dodging the taxes is the use of illegal devices smuggled in from India to transmit satellite television signals instead of subscribing to the distributors.
There are at least 11 cable operators who use smuggled devices -- DTH boxes of Tata Sky and DISH TV -- to transmit television signals to households, though the government does not allow the use of such devices, industry insiders say.
These cable operators who transmit 19 satellite television channels of STAR, Sony and Discovery groups, using Tata Sky and DISH TV, also pay fees to businesses in India through illegal channels, they add.
"Through this practice a huge amount of money is smuggled out of the country. The government is also deprived of revenue income that it would have got if the operators subscribed to us," observes a pay channel distributor.
Four satellite pay channel distributors do business in Bangladesh -- Total Sports, MGH, Nationwide and Translink -- that distribute 44 pay channels to cable operators.
The Coab president said some cable operators use DISH TV or Tata Sky, as some companies switched off channels in October last year due to payment related problem.
"That problem is now settled. But some operators may randomly use DISH TV or Tata Sky," he observed.
Whether Coab would ask its members to stop using Tata Sky or DISH TV, he said, "I would advise cable operators to discuss the matters with distributors to settle down problems, if there is any."
Admitting that the government does not have a mechanism to detect the number of subscribers of pay channels, Information Ministry Joint Secretary Abu Taher said they will soon buy a technology that determines the exact number of pay channel customers.
The government conducts drives if any complaints are made that operators are using DISH TV or Tata Sky, he added.