Foreign platforms like social media giants and television channels will now have to appoint their local agents to broadcast campaigns in Bangladesh from next fiscal year, the National Board of Revenue (NBR) said on Tuesday.
The local agents will pay 15 percent VAT on behalf of the foreign entities.
The revenue authority issued the directive as it revs up to implement the VAT and Supplementary Duty Act 2012 from July 1. Most of the local digital campaigners welcomed the move as it will bring transparency and ensure governance.
The market size of digital campaigns is estimated at more than Tk 1,000 crore and the government is deprived of any earning from the transactions.
The NBR said the new law—which will replace the VAT Act 1991—makes it compulsory for non-residents to hire VAT agent here to air programmes or to provide electronic services that are taken by people in Bangladesh.
As per the NBR directive, no local company can run their campaigns and advertisements to any foreign satellite television channels without paying any VAT to the government through the channels’ VAT agents.
This means, owners of satellite channels such as Zee Bangla and Star Jalsha will have to appoint their VAT agents and pay 15 percent VAT on their advertisement revenue from Bangladesh.
At the same time, electronic service providers namely Facebook, Google, YouTube, Messenger, Viber and WhatsApp will also have to do the same, said an NBR letter signed by Hasan Mohammad Tarek Rikabder, first secretary of VAT policy of the NBR.
The NBR requested the secretary of information ministry and chairman of the Bangladesh Telecommunication Regulatory Commission to ask all the non-resident firms to get VAT registration and hire VAT agents.
“We welcome this decision as the local e-commerce companies will be able to pay their digital campaign expenditure in local currency,” said Abdul Wahed Tomal, general secretary of the e-Commerce Association of Bangladesh (e-CAB).
Through this process transparency will be established and the government can get their fair share from the industry.
At present, the total expenditure for digital campaigning on the social media platform is more than Tk 1,000 crore and the government is only getting crumbs from the transactions, he added.
Developed countries and even India have adopted this system a few years ago, said Shahed Alam, head of corporate and regulatory affairs at Robi Axiata.
“Now we can spend on digital campaigning without any fear and can also use the documents to get VAT rebate from the NBR,” he said, adding that mobile operators are the biggest spenders on social media.
Mindshare, a popular digital campaigner with affiliation with different social media platforms, said they are not sure how the process would work.
“We have contacts with different social media platforms. They are observing the situations and what the NBR is going to do,” said Ehsanul Hoque, assistant director of Mindshare.
However, the Association of Television Channel Owners (ATCO) said this is a very minor move and the government needs to be tougher on the companies that are running their campaigns on foreign television channels.
“Companies are doing crime in the name of broadcasting their advertisements and that needs to stop,” said Arif Hasan, vice-president of ATCO.
The government needs to impose 200 percent tax; 15 percent is very minor, said Hasan, also the deputy managing director of Desh TV.
However, the NBR said the move will create a level playing field between the local television channels and the foreign ones.
Currently, local channels have to deposit VAT but the foreign ones do not have to although a number of advertisements broadcasted on the channels for the local audience, said an official of the NBR.
The NBR directive comes following pleas from ATCO to collect tax from the foreign television channels properly.
Newspaper owners earlier on several occasions demanded the revenue authority bring the global social media platforms such as Facebook and YouTube under the tax net as they eat up half the advertisement revenue share of the print media.
Users may face higher subscription fees for satellite channels owing to compliance by the foreign television operators with the VAT law, the NBR official said.