13 July 2024

Telco tax hiking to affect GDP growth: AMTOB

Mazharul Islam Mitchel

Published: 22:11, 12 June 2024

Telco tax hiking to affect GDP growth: AMTOB


Mobile operators leaders in a post budget reaction said that the imposition of an additional 5 percent supplementary duty on mobile service usage and a Tk 100 increase in the Value Added Tax (VAT) on SIM connections is expected to negatively impact mobile consumers and the telecommunications industry.

They told in the Post-budget Press Meet at the Association of Mobile Telecom Operators of Bangladesh (AMTOB) secretariat at a city hotel on Wednesday.

Taimur Rahman, Chief Corporate and Regulatory Affairs officer of Banglalink, Shahed Alam, Chief Corporate and Regulatory Affairs Officer of Robi Axiata, Hans Martin Henrichsen, Chief Corporate Affairs Officer of Grameenphone and Lt Col Mohammad Zulfikar (Retd.), Secretary General of AMTOB discussed their concerns with the the journalists.

They demanded that historically, higher service prices have led customers to reduce their mobile phone usage, resulting in lower revenue collection and decreased contributions to the government treasury. Additionally, the VAT increase on SIM connections, from BDT 200 to BDT 300, is likely to hinder the growth of new mobile subscribers. These measures, resulting in the highest mobile service tax rates in South Asia, combined with high inflation, could further hinder industry growth and innovation.

Despite requesting the government through various channels including the NBR, to bring the mobile sector taxes to a rational state, the government did not listen and imposed new levies. However, this time the government has increased the tax, which will have far-reaching impacts on the economy. Previously, recommendations presented to the government were not reflected in the national budget proposal.

According to data from the Bangladesh Telecommunication Regulatory Commission (BTRC), over 120 million subscribers out of 192.2 million SIM card holders in the country use the internet. The internet has become an essential part of daily life, with increased usage across social media, education, shopping, and office work. Despite the progress of Smart Bangladesh, 40 to 45 percent of the country's population remains unconnected. Compared to neighbouring countries, Bangladesh lags significantly in data usage at the customer level. However, there is substantial potential for revenue growth along with customer growth in this sector.

Due to the additional tax imposition, customers will have to pay BDT 139 to avail mobile services worth BDT 100, making it the highest in South Asia.

Currently, a mobile internet customer in Bangladesh uses an average of 6.5 GB of data per month, compared to 27-29 GB per month in neighbouring India. A review of consumer-level mobile internet service taxes in various countries shows the following rates: Malaysia 6%, Thailand 7%, Nigeria 7.5%, Singapore 9%, Indonesia 11%, Philippines 12%, Cambodia 13%, India 18%, Sri Lanka 23.5%, Nepal 26.2%, Bangladesh 33.25%, and Pakistan 34.5%.

At the initial stage of the "Smart Bangladesh vision", 42 percent of the country's population is still without telecom services. Among current mobile service users, 63% use mobile internet and 54% are 4G subscribers. This indicates that a significant portion of current users (37%) do not use mobile internet services and 46% are not yet using 4G services. Therefore, there is considerable potential for revenue growth in this sector.

Increasing the supplementary duty by five percent is expected to generate about 1.5 billion Taka in revenue. However, this revenue could be achieved by increasing data usage instead of raising levies. The current policy contradicts the vision of Smart Bangladesh. Thus, a rational tax structure is essential to accelerate economic growth through the continued development of mobile services and increased mobile internet usage at the consumer level.