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In Bangladeshi telecoms, high tax is a real hold-up
Publication Date : 13-02-2013
The tax regime of the telecom sector in Bangladesh needs to be revised with urgency for the sector's sustainability, ministers and government officials said on Tuesday.
A stable and predictable regulatory environment is a must, they said, to ensure sustainability of the telecom industry and safeguard investors.
“The more you reduce tax, the more you get in return,” said Mostafa Faruque Mohammad, information and communication technology minister, at a conference.
The Bangladesh Enterprise Institute organised the discussion on the future of the telecom sector and its contribution to the government's Vision 2021, in Dhaka.
The sector currently contributes 8.9 percent to the national coffers.
“The government should declare a five year-tax waiver to consolidate the telecom sector, just as it did for computer imports,” said Sunil Kanti Bose, chairman of the Bangladesh Telecommunication Regulatory Commission, the telecom regulator.
He urged the National Board of Revenue to check whether the current tax regime is business-friendly.
Bose also criticised the 15 percent value-added tax (VAT) operators had to pay to get their 2G licences renewed.
Still there is room for the operators to grow as voice penetration is 65 percent, while the actual penetration is 38-40 percent, Bose said, adding that people are using multiple SIMs.
Syed A Samad, executive chairman of the Board of Investment, too, called for revision of the tax regime.
“Tax has become a real paradox for the telecom sector,” he said.
Bangladeshi mobile operators pay the highest amount of taxes in comparison to their peers across the world, according to Hasanul Haq Inu, the information minister.
“You [the mobile operators] should go to court for the excessive taxes you are subjected to,” he said.
Citing Sri Lanka and Pakistan as examples, Rohan Samarajiva, founding chairman of LIRNEasia, an ICT policy and regulation think tank, called for a special taskforce to go over the tax structure.
“Thanks to the easing of the tax system, the telecom sectors in Sri Lanka and Pakistan are now flourishing,” said Samarajiva, the conference's keynote speaker.
He said the mobile voice service took off in the country because of the “budget model” the sector employed.
“For Internet penetration, the same model has to be followed. This is possible through good regulation only.”
Michael Kuehner, chief executive officer of Robi, said the journey of mobile telecom in Bangladesh has so far been successful because the government allocated spectrum to operators free of charge 15 years ago.
“600 Bangladeshi taka (US$7.5) SIM tax is a great obstruction to penetration at the grassroots level,” said Kuehner, also the chairman of the Association of Mobile Telecom Operators of Bangladesh.
Nazrul Islam Khan, the ICT secretary, said Bangladesh is lagging behind its neighbouring countries in terms of Internet penetration.
“The whole world believes that broadband penetration impacts the GDP, but the Bangladesh government does not pay any attention to it,” said information minister Inu, while suggesting abolition of 15 percent VAT on Internet usage. “VAT omission will give much higher returns to the country,” he added.
Farooq Sobhan, president of the Bangladesh Enterprise Institute, said the government's target of 70 percent telecom penetration by 2015 and 90 percent by 2021 can only be achieved through a “business-friendly environment”.