Budget for building Digital Bangladesh
The proposed budget for the 2021-2022 fiscal year acknowledges the Fourth Industrial Revolution and calls for strategies to create IT entrepreneurs and jobs for Bangladeshis abroad. It also suggests using the Bangladesh National Digital Architecture platform to enhance connectivity among government entities. This is a commendable approach towards Digital Bangladesh.
The inclusion of cloud service, system integration, e-learning platform, e-book publication, and mobile application development service in IT-enabled services (ITES) definition, as proposed by the Bangladesh Association of Software & Information Services (BASIS), is also a welcoming move.
The finance minister deserves a big thank for his proposal of bringing the hardware devices produced in the country under tax exemption. In the interest of local computer manufacturers, the budget proposes increasing tariffs on the imports of feature-phone and encouraging mobile phone production locally. This will also encourage investors to produce digital devices in the country. I also hope that the use of smartphones instead of feature phones will increase.
The massive budget allocation of Tk 1,720 crore in the ICT sector is impressive. It is about 20 per cent more than the outgoing fiscal year's original budget. However, the proposed budget does not have a clear breakdown of the allocated amount. It is not clear how much has been set aside to procure software and ITES and maintenance.
In most government projects, it is seen that the allocated budget is spent on buying hardware, and hardly any amount remains to purchase software, services, or maintenance.
There should be a clear plan of how local companies can be involved in the digitalisation process of ministries, departments, and directorates.
Although the software and ITES businesses have been exempted from the corporate tax until 2024, the sector has suffered a lot in the last 15 months due to the pandemic.
More local and foreign investments are needed in this sector. To draw investors, the tax exemption period should be extended to 2030 as proposed before the budget. The sooner this announcement comes, the more investors will be interested in investing in the sector. I request the government to consider the matter very seriously.
Internet is now one of the main ingredients for all kinds of business. All types of digital activities are going on through internet. To make it easily available and affordable, it is necessary to remove VAT on internet and recognise internet service as ITES. The government must look at the bigger picture and stop taxing the medium that can propagate many new online businesses, like digital commerce, telemedicine, video-streaming, OTT (over-the-top) services, etc. These new businesses can generate more tax revenue than the government now gets from internet services.
If broadband internet services can be expanded to remote areas at an affordable rate, the young people will be able to start their own ventures using internet and start contributing to the economy. Therefore, the corporate tax exemption on internet service providers, a key stakeholder of the Digital Bangladesh Vision, will lead to infrastructural development and increased employment and economic activities.
Bangladeshi IT companies now have the experience to execute big projects. These local companies have been successful in implementing big projects locally, such as driving licence, national identification card, vehicle registration plate, Hajj management, and data centre. It is possible to replicate these projects without much effort in other underdeveloped or developing countries.
If there is a government-to-government agreement between Bangladesh and other countries that Bangladesh will finance the implementation of these projects on the condition that the work has to be done by Bangladeshi companies, then our local companies will get international exposure and experience. As a bonus, the money will return to the local economy. This way, the image of Bangladesh in the world market will broaden, and Bangladesh will be rebranded and recognised as a country of skilled workforce.
The BASIS had proposed to set aside Tk 500 crore as a technical assistance project in the budget. I request the finance ministry to consider the matter.
During pre-budget discussions, the BASIS had also requested a special allocation of Tk 300 crore to increase the involvement of women in the ICT sector. Participation of women in the sector can be greatly accelerated if easy loans are arranged for women entrepreneurs at an interest rate of 2 per cent from this special fund.
The proposal to increase the corporate tax rate for mobile financial service (MFS) providers is quite confusing. Even though this will not affect the MFS providers immediately as none of them is making any profit, this will surely slow down the gradual decline of the commission rate of money transfer. When the government is envisioning a cashless society, and we are proposing VAT exemption and cash back incentives on digital transactions, the proposal to raise the tax rate is frustrating. I hope the finance ministry will reconsider the matter.
Currently, large scale infrastructure projects, such as Metrorail, Rooppur Nuclear Power plant, and a new airport terminal are being constructed. These projects will need software and services worth hundreds of crores of taka. The local industry must get this business and benefit from the government's expenditure for these projects. Patronising local companies for supplying ICT products and services will help the industry grow. It will also generate employment opportunities.
In the case of foreign contracts, local value-addition has to be ensured so that knowledge and technology transfer takes place. This will prove cost-effective for future maintenance and support and create a skilled human resources pool.
The proposed budget has recommended a 10-year tax exemption on training in about 25 subjects. But surprisingly, this does not include IT training.
The government plans to increase the number of IT professionals in the ICT sector to 20 lakh by 2025 from 10 lakh now. This trained workforce is essential for the successful and speedy implementation of the Digital Bangladesh Vision. Therefore, to encourage ICT training, it is necessary to announce tax exemption for it.
For the desired development of the information and communication technology sector and building coveted Digital Bangladesh, I earnestly hope that the policymakers will consider the above issues during the ongoing budget session of the parliament.
The author is president of the Bangladesh Association of Software & Information Services.