Duty hike to hurt internet consumption, digital potentials: Stakeholders

The duty burden added mid-fiscal on broadband internet and mobile telecom services will lead to a cut in internet consumption and limit Bangladesh's digital potential, stakeholders have said.

"We are seeing a risk of a shrink in the present user base of fixed broadband users as the mass people are struggling a lot to sustain the high inflation," said Emdadul Hoque, president of Internet Service Providers Association of Bangladesh.

A 5Mbps broadband connection used to cost people Tk500 a month. Practically, the Tk25 value added tax (VAT) on it was being paid by the internet service providers (ISP), he told The Business Standard.

Now, with the 10% supplementary duty (SD) imposed last week the price before VAT surged to Tk550 and the same 5% VAT made the monthly cost to Tk577.5.

He fears the ISP industry cannot afford to pay the added cost themselves as it is much higher than their profit margin. "The entire burden will be borne by users."

Products and services procured by the ISPs have been made expensive through the VAT hikes by some 2.5 to 5 percentage points last week.

Hoque said a large number of consumers will switch to slower connections to cope up with their rising costs for everything. Also, some might stop using the fixed connections and opt for need based short term mobile data packs to save money.

Tanjiba Rahman, chairperson of Bangladesh Freelancing Development Society, said over a million online workers in Bangladesh need affordable and reliable broadband internet.

"For long, we were stressing for reliable, affordable internet connections, which is yet to be a reality for the individual users," she said, blaming a lack of stable dedicated connections for small users.

Price hike will make the freelancers' struggle worse, she told TBS.

"SD is well known to be a tool to discourage consumption of something and the internet must not be a part of it," said technology entrepreneur Fahim Mashroor, former president of the Bangladesh Association of Software and Information Services.

If consumers cannot afford the services and the industry struggles, the government plan for higher revenue might backfire, he added, criticising the government decision without any stakeholder consultation.

Several associations and forums in a human chain in the capital on Sunday called for immediate cancellation of the added duty burden which was already high in the country, said Bangladesh Mobile Phone Consumers Association President Mohiuddin Ahmed.

Revenue authorities on Thursday also increased the SD on mobile recharge to 23% from 20%, forcing consumers to pay more than Tk142 for a Tk100 usable balance.

Grameenphone Chief Corporate Affairs Officer Tanveer Mohammad, expressing his surprise, said this is the second SD hike in the past seven months while consumers have been struggling with daily expenses due to the double digit inflation.

"We urge the government to reconsider this decision in the interest of customers and for attaining the broader goal to build a digitally inclusive society," he added.

Robi Axiata Chief Corporate and Regulatory Affairs Officer Shahedul Alam said most of the mobile phone consumers are cost sensitive and they will cut usage, switch to smaller packs.

Not even half of the Bangladeshis are connected and Pathao CEO Fahim Ahmed blamed the already prevailing "highest telecom taxes in the region by far" for dragging the addressable market to a fraction of its likely potential."

"The recent SD hike on mobile recharge and internet is incredibly myopic," he said.

According to the Bangladesh Telecommunication Regulatory Commission that is battling for cheaper and quality internet, internet subscription through mobile and fixed broadband dropped below 13.72 crore in October last year, from nearly 14.22 crore in June.

Financial hardship slightly reduced the number of fixed broadband connections to around 1.28 crore already, said Emdadul Hoque with a fear of further decline.