SIM tax cut encouraging, structural challenges remain

The FY2026-27 national budget arrives at an important moment for Bangladesh's economy.

As the country seeks to sustain growth, create jobs and expand economic opportunities across all regions, one policy measure deserves particular attention: the decision to remove the Tk300 SIM tax.

Budget discussions often focus on major fiscal allocations and infrastructure projects. But lowering barriers to digital connectivity may prove equally significant for Bangladesh's long-term development.

In today's economy, mobile connectivity is no longer a luxury. It is increasingly the gateway to education, financial services, entrepreneurship, employment opportunities and access to public services.

For many years, the SIM tax increased the upfront cost of entering the digital ecosystem. Although introduced as a revenue measure, its impact fell disproportionately on lower-income consumers and first-time users, particularly in rural and underserved communities.

Its removal sends an important signal that digital connectivity should be viewed as an enabler of economic participation and inclusion.

The economic case for expanding connectivity is well established. A recent study by Frontier Economics found that a one percentage point increase in mobile penetration is associated with a 0.12 percentage point increase in GDP per capita growth. The broader implication is clear: expanding access to digital services generates benefits that go well beyond the telecommunications sector.

Greater connectivity enables small businesses to reach new customers, facilitates access to digital financial services and supports participation in the formal economy. As more people and businesses engage digitally, economic activity becomes more productive, transparent and scalable.

Over time, this can contribute to a broader tax base and more sustainable revenue generation.

These benefits are particularly relevant as Bangladesh navigates a challenging economic environment. The country continues to face inflationary pressures, fiscal constraints and the need to mobilise resources to support development priorities. In such circumstances, policies that encourage investment, productivity and economic participation become increasingly important.

The removal of the SIM tax is therefore a welcome step. But it should also be viewed as part of a broader discussion on digital taxation and investment.

Bangladesh's telecommunications sector continues to face multiple layers of taxes, fees and levies that increase the cost of connectivity and reduce the resources available for network expansion and technological upgrades. As the country seeks to accelerate digital adoption and attract greater investment, a review of the overall fiscal framework governing digital infrastructure is both timely and necessary.

Spectrum policy is another important consideration. Spectrum is the essential resource that enables mobile operators to expand coverage, improve network quality and deploy next-generation digital services. Yet spectrum costs in Bangladesh remain high compared with many similar markets.

This places significant financial pressure on operators and can limit the capital available for investment in network expansion, service quality improvements and emerging technologies.

As Bangladesh advances its digital transformation agenda, spectrum should be viewed not merely as a source of short-term fiscal revenue but as a strategic national asset that underpins economic growth.

A more investment-oriented approach to spectrum pricing and assignment can help accelerate network deployment, improve service quality and extend digital access to underserved communities.

The government's initiatives to streamline business processes through digital platforms and simplify administrative procedures are encouraging. Regulatory predictability, efficient public services and a supportive investment environment are critical to attracting private capital and creating employment opportunities for a growing workforce.

As policymakers seek to strengthen public revenue, fiscal measures should support long-term economic expansion rather than create barriers to participation. The proposed withdrawal of withholding tax on digital creators reflects an appreciation of the opportunities emerging within the digital economy.

Extending similar thinking across the broader digital ecosystem can help accelerate adoption, encourage investment and support innovation.

Bangladesh's aspiration to become a trillion-dollar economy will ultimately depend on how effectively it expands economic opportunity and productivity across all segments of society. Digital inclusion is no longer a peripheral issue; it is central to achieving those goals.

The decision to remove the SIM tax is more than a tax policy adjustment. It reflects a recognition that connectivity is an essential component of modern economic development.

However, if Bangladesh is to fully realise its digital ambitions, further attention will be needed to the broader policy framework that shapes investment in digital infrastructure, including telecom taxation and spectrum pricing.

Creating greater room for network investment today can accelerate digital and financial inclusion, enhance competitiveness and help build the foundations of a more productive, innovative and prosperous economy.