Operators propose mobile internet tax cuts

The Association of Mobile Telecom Operators of Bangladesh (Amtob) has proposed a reduction in tax on mobile internet usage in the budget for fiscal year 2021-22.

The organisation has proposed an increase in the value-added tax (VAT) rate to 15% by withdrawing the supplementary duty and surcharge imposed on internet users.

The proposal, signed by Amtob Secretary General Brigadier General (retd) SM Farhad, was sent to Finance Minister AHM Mustafa Kamal on 8 March.

It has called for reducing corporate tax rates and the minimum rate on sales in the telecom sector. The organisation will make a similar proposal at a pre-budget meeting with the National Board of Revenue on Thursday.

At present a 21.75% tax – 5% VAT, a 15% supplementary duty and a 1% surcharge – is levied on mobile internet.

Amtob proposed the imposition of 15% VAT by withdrawing supplementary duties and surcharges, saying that initially, VAT on the Internet was 15%.

In fiscal year 2018-19, the VAT rate was reduced to 5% for digitisation. The subsequent imposition of supplementary duties and surcharges on it has placed the service costs on customers and is hampering the government's digitalisation vision. In addition, internet service providers do not have to pay a supplementary fee and surcharge, the organisation added.

Proposing a reduction in the corporate tax rate to 25% for listed telecom companies and 32.5% for non-listed ones, Amtob said the tax rate for listed telecom operators was 35% for the 2012-13 financial year.

The tax rate for both the listed and non-listed companies increased to 40% and 45%, respectively, in a move to reduce the tax gap; although, at that time the tax rate gap for companies paying corporate tax in the general category was 10%.

Amtob said that in the last few years, the general tax rate has been reduced to 32.5% for non-listed companies and 25% for listed ones; however, the tax rate is still 45% for non-listed telecom companies and 40% for listed ones.

"While telecom services were considered essential like other basic needs during the Covid-19 pandemic, they have been compared to luxury or health risk industries while imposing the corporate tax – although telecoms have made significant contributions to Bangladesh's socio-economic development and digital inclusion," Amtob added.

At present, telecom companies have to pay a 2% income tax on their annual total sales price. Proposing its withdrawal, the organisation said, "The minimum tax rate is 1% for harmful industries such as cigarettes or tobacco, but 2% is not at all reasonable in important sectors such as mobile telecoms."

At present, there is a VAT of Tk200 on each SIM, which the organisation has recommended being withdrawn, saying that the SIM tax is acting as a barrier to increasing the speed of mobile connectivity among low-income people in the society.