Digital service providers demand tax holiday

Seven digital service related trade bodies yesterday termed the proposed budget unfriendly towards the sector and demanded full withdrawal of VAT along with the other taxes and surcharges from internet usage.

The associations also called for reforming the tax structure for digital services and tax holidays for internet-related businesses for the next 10 years at least, which will help the sector flourish.

“We all believe that if the government withdraws VAT and other taxes from the customer's internet usage, it will help establish a digital culture in the country,” TIM Nurul Kabir, secretary general of the Association of Mobile Telecom Operators of Bangladesh, said in a joint press conference at the capital's Pan Pacific Sonargaon hotel.

Currently, there is a 21.75 percent tax on customers for internet usage. “To become a digital society this tax burden needs to be withdrawn.”

The government is earning about Tk 1,100 crore from value-added tax on internet usage. If the amount is forfeited for two years it will yield the government about Tk 5,000 crore every year, he added.

“First we need to get digital businesses to flourish and then we can go for imposing tax on it,” said Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services (BASIS).

Services like online commerce and ride-hailing should be tax-free for a while to create a digital society.

“We need a few years to develop the ecosystem for digital services and when people become habituated with digital services the government will start earning more.”

Digital society also can help the economy to grow and create more jobs from the sector.

In the last few years different trade bodies have demanded withdrawal of VAT from internet usage but the National Board of Revenue never pay heed to the call.

“However, this year the finance minister promised he would give us good news but nothing came,” the BASIS president added.

Md Ruhul Alam Al Mahbub Manik, president of Bangladesh Mobile Phone Importers Association, said they have been harbouring a dream to assemble mobile handsets in Bangladesh but the sudden imposition of 15 percent VAT put the brakes on their plan, which had a few hundred crores of taka riding on it.

On the budget day, the NBR issued a statutory regulatory order listing 10 conditions for assemblers, failing which a 15 percent VAT would be imposed on the handsets assembled.

The total tax would be about 34.2 percent if the 15 percent new tax is added with 18.8 percent VAT that the local assemblers now pay. The import tariff for mobile handsets is 31.1 percent now.

“We have no other way to reduce the price of smartphones for establishing a digital country. Only local assembling can ensure cheap handsets for customers,” Manik added.

MA Hakim, president of Internet Service Providers Association of Bangladesh, said they have demanded tax cuts but the government never honoured any of their logical demands.

The government has imposed tax on hardware for the first time in the budget for 2018-19 and if this budget is passed computer and laptop prices will increase at least 11 percent, said AU Khan Jewel, a director at Bangladesh Computer Samity.

Nasima Akter Nisha, joint secretary of the e-Commerce Association of Bangladesh, and Mohammad Aminul Hoque, joint secretary general at the Bangladesh Association of Call Centre and Outsourcing, were also present.