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Telecom sector in budget FY25

Additional tax burden to impede journey to Smart Bangladesh

Rased Mehedi

Rased Mehedi

Thu, 6 Jun 24

The proposed budget for the fiscal year 2024-25 has raised a complex question among analysts regarding the allocation in the Telecommunication and Information Technology sectors. Analyzing this budget from a supportive or non-supportive perspective for these two sectors is crucial. No budget can entirely satisfy everyone, but the extent of satisfaction or dissatisfaction determines whether the budget is evaluated as supportive or non-supportive. While the announcement of extending the deadline for tax exemption in the Information Technology sector is promising, increasing taxes in the Telecommunication sector might impede the progress of Smart Bangladesh.

Let's first explore the supportive aspects for the Telecommunication and Information Technology sectors in the proposed budget. Extending the existing tax exemption benefits in the Information Technology sector for three more years is highly encouraging. However, proposing an extension until 2033 instead of 2027 would have been more beneficial for entrepreneurs, businesses, and consumers in Smart Bangladesh. As we are on the journey towards Smart Bangladesh, aligning these extensions with the transformation goals in information technology would have been prudent. Hence, claiming tax exemption until 2041 would have been more logical.

Currently, the pace of advancement in information technology indicates a need for extending the tax exemption deadline for at least another ten years to maintain market stability amidst global technological advancements. The influx of freelancers and the emergence of a large number of entrepreneurs in the Information Technology sector due to tax exemption benefits in recent days indicate that even more success can be achieved in innovation within this sector. Therefore, extending the tax exemption benefits further would ensure the protection of these aspirations of our youth entrepreneurs.

While in recent days, tax exemption benefits in the Information Technology sector have attracted a large number of freelancers and made it possible to create a significant number of entrepreneurs from the middle class, extending the deadline for tax exemption benefits until 2027 has provided some relief. However, the reality of the changes in the Telecommunication and Information Technology sectors due to technological advancements implies that extending the deadline for tax exemption benefits for at least another ten years is economically justifiable. Because the global information technology market is undergoing a transformation, the pace and excitement of that transformation will accelerate. It is the responsibility of the government to ensure the protection of opportunities for our youth entrepreneurs, freelancers, and innovators in this journey.

In the proposed budget, VAT on new connections (SIM cards) for mobile telecommunications has been increased from 200 to 300 BDT. Additionally, supplementary charges for mobile phone calls and mobile internet usage have been increased by 5%, totaling a 20% increment. Furthermore, a proposal to increase VAT on mobile handset production by an additional 5% has been made. This implies an overall increase in the cost of mobile phone usage. While this increase may not matter much to high-income individuals, it will be a significant burden for those with low to moderate incomes.

The subject is quite fascinating. You are increasing the tax exemption for the information technology sector in the budget. On the other hand, you are increasing the prices of devices and internet usage for information technology. Although it can be said that in this year's budget, the import duty on laptops has been reduced from 31 percent to 20.50 percent, resulting in a decrease in the price of laptops. The decision to impose supplementary duties on mobile telecommunications and internet usage has increased the total tax by 20 percent. In addition, the VAT on mobile handsets has been increased by an additional 5 percent. This means that the overall cost of using mobile phones, talking on mobile phones, and using mobile internet will increase.  

The decision to impose VAT on laptop imports in FY 2023-24 was a big mistake. Thank you for rectifying that mistake in this year's budget. However, it must be remembered that the current world is driven by smartphones. Today's youth are more enthusiastic about accomplishing necessary tasks on smartphones than laptops. Those who are budget-conscious should think about their own experiences, how much time they spend on smartphones versus laptops or desktops. Once you have the answer, consider how urgent it is to ensure the production and supply of affordable smartphones. So, reconsider the proposal to increase VAT by 5 percent on production levels. This additional 5 percent VAT will lag behind the goal of achieving a Smart Bangladesh, but will not play a major role in government revenue collection.

According to the latest statistics from the Bangladesh Telecommunication Regulatory Commission (BTRC), there are currently 13 crore 85 lakh 90 thousand internet subscribers in the country. Among them, 12 crore 25 lakh 15 thousand mobile internet subscribers. Among these subscribers, those with moderate and low incomes are the majority. Among them are tea workers who have struggled for 19 days to increase their wages by 50 taka. For these people, a single taka is still very valuable. Why should they understand the additional surcharge on their backs, VAT, or supplementary tax? A large number of young people in the country are freelancing in the global information technology market, working as content creators on social media, and 90 percent of them use smartphones and mobile internet. Why should they understand the additional surcharge on their backs? You have increased VAT, so fewer smartphones will be sold, and fewer mobile internet packages will be sold, resulting in less revenue in the new fiscal year than in the previous fiscal year. There is no reason to think that way. Rather, due to the cleverness of increasing supplementary VAT collection, revenue collection from this sector may decrease.

The current finance minister is a knowledgeable person in economics. Hopefully, he will understand the concerns of stakeholders related to the telecommunications and information technology sector regarding the proposed budget and will step back from the decision to increase VAT and supplementary charges. He will play an active role in accelerating the journey towards a Smart Bangladesh.

Rased Mehedi: Telecommunications Analyst & President, Telecom and Technology Reporters Network, Bangladesh (TRNB)

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