Tax uncertainties a challenge to e-commerce existence

Tax-related uncertainties create a huge burden on the industry and also challenge their existence, said top e-commerce entrepreneurs yesterday.

In a roundtable organised by the Bangladesh Association of Software and Information Services (BASIS), they demanded long-term tax exemptions for the market to grow and create a user base.

In the proposed budget for fiscal 2019-20 the finance minister sought a 7.5 percent value-added tax on virtual businesses.

“E-commerce is not only a business; rather, this is an ecosystem that digitalised all related stakeholders and ensured transparency,” said Ashikul Alam Khan, chief executive officer of PriyoShop.com, a leading e-commerce site.

So to ensure transparency the government should promote e-commerce.

“If the proposed VAT is implemented, we will have no option but to shut down our business,” he added. This will clearly be double taxation, said Zeeshan Kingshuk Huq, CEO of Sindabad.com, a business-to-business e-commerce entity.

“We are purchasing from suppliers after paying VAT and now we will have to pay another 7.5 percent VAT and will not be able to claim rebates from the National Board of Revenue (NBR),” he added.

Meanwhile, e-commerce entrepreneurs sought tax exemption for at least five years.

People had just started spending on the digital platforms and the government has started burdening it with taxes, said Syed Almas Kabir, president of BASIS.

The industry needs to grow further and only then could the tax issue come up.

“Online shopping is not a practice of the affluent class only. Rather, the platform is used more by the middle-class and marginal people,” he added.

E-commerce sales amounted to about Tk 1,000 crore per year and if the government gets 7.5 percent of it it would hardly be Tk 75 crore, said Syed Mohammad Kamal, a BASIS member.

“This is nothing compared to the NBR’s collection. Saving a very important industry that has immense potential is much more important than collecting Tk 75 crore from it,” said Kamal, also the country manager of Mastercard.

People is just getting used to e-commerce and because of the 7.5 percent VAT prices would be hiked in online sites, said Mirajul Huq, CEO of bagdoom.com.

“People will lose their motivation to make purchases online and that’s why VAT should not be imposed right now in this sector,” he added.

If this VAT comes into effect none would be interested in investing on digital platforms, said Abdul Wahed Tomal, general secretary of the e-Commerce Association of Bangladesh (e-CAB).

Another e-CAB leader said the proposed VAT contradicts with the government’s digital commerce policy.

The industry leaders, however, welcomed the increase in budget for the ICT sector’s development to Tk 2,176 core.

Besides, the government allocated a Tk 100 core fund for start-ups, which will bring innovation to the industry, they added. Farhana A Rahman, senior vice-president of BASIS; Didarul Alam, director; and some other digital service providers, also spoke.