Reforming telecom taxation to accelerate digital inclusion and investment

Bangladesh's telecom sector has long been a key enabler of economic modernisation and digital inclusion. As the country advances toward its goal of becoming a trillion-dollar economy, this sector stands ready to play an even more transformative role.

With its nationwide reach and growing digital capabilities, the industry continues to connect millions and support the development of a vibrant digital economy.

Strengthening the sector through forward-looking policies and investment-friendly reforms will be instrumental in unlocking its full potential and accelerating national progress.

Over the past decade, the telecom sector has experienced a 56 percent decline in Average Revenue Per User (ARPU), which now stands at just $1.3 in Bangladesh—one of the lowest globally.

This trend raises critical concerns about the long-term sustainability of the industry. Despite these challenges, telecom operators remain committed to advancing the nation's digital progress.

Continued investment in network modernisation, rural connectivity, and next-generation technologies is no longer a choice—it is essential for closing the digital divide and driving innovation.

The industry stands prepared to play an even greater role in national development by unlocking new opportunities for individuals and businesses across the country.

As the telecom industry continues to play a key role in driving digital inclusion, it does so under significant fiscal pressure, despite shrinking revenues.

Although the sector contributes just 1 percent to Bangladesh's gross domestic product (GDP), it is responsible for an estimated 5 percent of the country's total tax revenue—one of the highest ratios globally—highlighting a persistent structural imbalance in its fiscal treatment.

Mobile network operators (MNOs) are also subject to a minimum turnover tax of 2 percent on gross receipts, a rate notably higher than in many other industries.

For comparison, the tobacco industry faces a minimum turnover tax of 1 percent, while other entities with annual turnover exceeding Tk 3 crore pay only 0.6 percent.

According to the GSMA, mobile users in Bangladesh face one of the highest sector-specific tax rates in the Asia-Pacific region.

With an effective VAT rate of 18 percent, a supplementary duty of 20 percent, and a 1 percent surcharge, the total tax burden on mobile usage stands at 39 percent.

Further compounding the challenge is the corporate tax structure.

Telecom operators are subject to a corporate tax rate of 40 percent if listed and 45 percent if non-listed—significantly higher than most other sectors in Bangladesh, and well above the rates applied in neighbouring countries such as Nepal, Sri Lanka, and India.

The supplementary duty (SD) on SIM cards was increased from 15 percent to 20 percent, and the eSIM tax was raised from Tk 200 to Tk 300.

While these adjustments may support short-term revenue goals, they risk triggering a downstream effect—potentially causing the sector to lose low-income users.

This would negatively impact digital and mobile penetration in underserved areas. The same applies to IoT SIMs, where high taxes discourage digitalisation by hindering infrastructure modernisation.

The current fiscal measures place additional strain on consumers and slow the nation's progress toward achieving universal digital inclusion.

Investors are less likely to commit to long-term investments if they cannot predict the fiscal environment upon market entry.

Furthermore, spectrum costs in Bangladesh remain among the highest in the world, while the licensing regime is both complex and fragmented—significantly increasing the administrative burden for telecom operators.

Additionally, the current restrictions on infrastructure ownership and sharing have led to operational inefficiencies.

Despite the fact that there are approximately 45,000 telecom towers across the country, only about 22,000 are currently managed by independent tower companies.

The existing policy framework limits the prospects of these entities, reduces opportunities for shared infrastructure, and hinders rural rollout efforts.

Regulatory ambivalence also remains a critical barrier.

Excessively rigid compliance requirements, retrospective audits, and vague penalties have created an unforeseeable environment for operators, as stated in the recent GSMA study on "Enabling Mobile Network Investment Policy Reforms for Bangladesh".

Without a balanced and transparent regulatory structure, even the most ambitious digital transformation strategies will fall short of their objectives.

The consequences of these challenges are far-reaching.

They are curbing investment in the telecommunications industry, which directly affects the inclusiveness and pace of development of digital infrastructure and the inclusion of all.

At the macroeconomic level, Bangladesh is at risk of falling behind its regional peers, who have already embraced more advanced and investment-friendly telecommunication policies.

Now, if our nation aims to become a digitally empowered economy, then it is vital to reform the fiscal and regulatory policy for the telecommunications sector.

The country and the government should adopt a balanced approach that will foster long-term investment and ensure fair contributions to public revenue.

As a first step, the government should decrease the tax burden and align it with regional and domestic industry norms.

Similarly, it should reassess the SD and SIM taxes, simplify the licensing and spectrum allocation processes, and empower tower-sharing arrangements that will collectively improve sector viability.

Likewise, it is critical to foster more collaborative relationships between industry stakeholders, policymakers, and regulators.

Continuous dialogue can help align fiscal requirements with the industry's growth needs and develop a more supportive and predictable environment for domestic and foreign investors.

Finally, the sector must be seen as a strategic enabler of broader economic transformation.

Innovative and well-thought-out policy reforms have the power to fast-track rural connectivity, unlock greater FDI, and position the country as a regional leader in digital innovation.

We must remember that even though the opportunity is evident, time is still of the essence.

By adopting a future-facing policy framework today, the country can ensure that its telecommunications industry remains the backbone of progress for years to come.

To unlock the full potential of Bangladesh's digital economy, it is imperative to introduce a lower taxation regime and a more streamlined, integrated regulatory framework.

Today, telecom operators are burdened with as many as 18 different licences—an outdated and fragmented model that stifles efficiency and innovation.

By reducing tax pressure and consolidating these regulatory requirements, we can create a more enabling environment that encourages foreign investment, strengthens Bangladesh's position as a digital investment hub, and accelerates national progress.

This will also enable MNOs to expand into high-impact verticals such as digital financial services, digital healthcare, education, entertainment, and IoT solutions—creating new avenues for investment and contributing to broader economic growth.

With its large, youthful, educated, and resilient population, Bangladesh holds immense potential to emerge as a leading economic force—not just in the region, but on the global stage.

What is needed now is the right set of forward-looking policy measures to fully realise this potential.

As the country embarks on a path of reform, there is no better time than now to implement the changes that will shape a more prosperous future for all.

The writer is the chief executive officer of Banglalink.