23 May 2024

Excessive taxes, regulatory fees make investors conservative: Telcos

Mazharul Islam Mitchel

Published: 22:57, 7 April 2024

Update: 22:57, 7 April 2024

Excessive taxes, regulatory fees make investors conservative: Telcos

The telecom industry, a significant recipient of foreign investments in the country, is a victim of excessive taxes, regulatory fees, and various complexities that have made investors more conservative about investing in Bangladesh, said mobile operators at a roundtable on Sunday.

At the programme titled “Telecom Taxation for Smart Bangladesh,” representatives from the Association of Mobile Telecom Operators of Bangladesh (AMTOB) called for rationalising taxes to continue investing for a “Smart Bangladesh” dream by 2041.

“Bangladesh stands at the top of the global list in terms of collecting high taxes, duties, and regulatory fees that total as high as 51% of the revenue of the companies, while the global average is only 22% and 10%-17% in countries like Thailand, Malaysia,” said Lt Col (retd) Mohammad Zulfikar, secretary general of the association, in a keynote presentation.

At the event organised by the Telecom Reporters Network Bangladesh in the capital, he also said the bills paid to industry ecosystem partners and operational costs raise the total industry cost to 84-105% of the total revenue.

Grameenphone, as the largest and most efficient player, managed to retain only around 20% of the revenue for its investors last year, he added.

Mohammed Shahedul Alam, chief corporate and regulatory affairs officer of Robi Axiata, also attributed the increased practical complexities within the tax ecosystem to higher effective taxes and fees.

For instance, he said the disagreement between the National Board of Revenue (NBR) and the Bangladesh Telecommunication Regulatory Commission (BTRC) over whether value-added tax (VAT) should be collected from a government entity. This resulted in operators not receiving receipts for the VAT they paid against the spectrum fees to the BTRC.

It deprived companies of some available relief from high taxes and duties. Also, the NBR tends to disallow various significant expenses of companies, which raised the effective taxation and fees to over 70% for his company, leaving almost nothing for shareholders, added Alam.

Despite having precedents like a European Court of Justice verdict that there should be no VAT on spectrum fees, it became subject to VAT following a court order in Bangladesh, he said, adding that the industry needs significant investments to drive the Smart Bangladesh dream, and telecom investors, mainly foreign ones, have become conservative about investing in Bangladesh.

Other representatives of the telecom industry mentioned that a minimum 2% tax on turnover and an extremely high 45% corporate tax in Bangladesh are comparable only to the tobacco industry, while telecommunication services are neither a luxury nor harmful for the people.

Citing International Telecommunication Union (ITU) studies, Mohammad Zulfikar said video streaming, non-video, and industrial traffic would rise by 30, 14, and 47 times, respectively, in the next decade globally, and Bangladesh would see similar growth, if not higher, with a conducive environment.

The World Bank estimates that the digital economy contributes more than 15% to global GDP, growing two and a half times faster than physical world GDP in the past decade.

According to the ITU, countries like Bangladesh would experience a 2.48% GDP increase if mobile broadband penetration rose by 10%.

A friendly tax regime should attract continuous investments in the telecom sector and realise its potential, opined experts, while seeking complete automation and simplification of taxation processes.

“If the ICT sector is the boat, the telecommunication sector is the river,” said State Minister for ICT, Post, and Telecommunication Zunaid Ahmed Palak, quoting Prime Minister’s ICT Advisor Sajeeb Wazed Joy.

In his speech as the chief guest at the roundtable moderated by TRNB President Rashed Mehedi, Palak assured the industry of his leadership in coordinating among the relevant ministries and the NBR in response to industry frustration with no positive outcomes from their discussions and dialogues over the years for a rational tax regime.

The telecom industry has made a cumulative investment of around Tk1,50,000 crore, enabling them to contribute around Tk2,50,000 crore to the national exchequer in total. Against annual investments of around Tk5,000 crore nowadays, their annual contribution to the national exchequer stands at Tk19,000 crore, according to AMTOB.

Robi’s Shahedul Alam said the industry could invest more for a greater contribution to economic development and the national exchequer if taxation became more rational and smarter.

The Bangladesh Telecom industry, with revenue equal to 1% of the GDP, contributes to 5% of the government revenue annually, compared to 1% in Pakistan and Kyrgyzstan.

In countries like Kazakhstan, Thailand, and Malaysia, the industry’s revenue contribution is smaller than their direct GDP contribution.

Speakers at the event included BTRC Chairman Md Mohiuddin Ahmed, former chairman Shahjahan Mahmood, AMTOB President and GP CEO Yasir Azman, Banglalink Acting CEO Taimur Rahman, and ICT experts Sumon Ahmed Sabir and TIM Nurul Kabir.