Driving to Digital Bangladesh in reverse gear
There is absolutely no doubt that the united states has come a long way in fulfilling its vision of becoming Digital Bangladesh. With significantly less than a year staying in the timeframe, Bangladesh appears set to make great on its promise thanks to the visionary policy assist from the government.
The government's commitment towards digitalisation encouraged the private sector to become a part of this history. Specifically, the telecom sector stood out as the utmost impactful spouse of the federal government in applying the national vision.
But when you look at the taxation regime created by the tax authorities you get started to question if they are playing their due role by creating fiscal space for the telecom industry to allow it to contribute fully.
If I were to choose the most unjust area of the taxation regime for the investors, it will be the 2 2 per cent minimum turnover tax. Telecom companies give 2 per cent of their revenue to the tax authorities whether they produce any profit or certainly not.
Let's suppose an operator's revenue in 2019 was Tk 100 crore. Which means the operator will have to pay Tk 2 crore as the minimum turnover tax for the entire year.
The operator must finance the tax from the profit it had produced. If the operator were to report losses, it could still have to pay the minimum Tk 2 crore from its capital or through borrowing.
This is outrageous! It is certainly not section of the recipe for creating a conducive investment climate in the telecom sector. The two 2 % turnover tax generally is sucking the oxygen out of the industry like the coronavirus, especially small operators, who happen to be struggling to generate a profit.
In addition to the telecom sector, zero other sector was created to pay 2 % minimum turnover tax. The simply different sector that comes near to the telecom sector may be the tobacco sector, nonetheless it is needed to just pay 1 per cent.
Besides, the telecom industry and the tobacco industry will be put through the same corporate tax rate of 45 per cent.
Usually, the government tries to levy considerably more tax in industries that happen to be harmful or even to discourage certain industries from policy perspective. If you apply that logic you need to conclude that the tax authorities consider the telecom sector more harmful or more non-conducive than the tobacco sector since we pay for 2 per cent of our earnings as the minimum turnover tax while they just pay 1 %. Any sane person would term it an utter insanity.
Studies show a primary link between GDP growth and the growth of telecom and net penetration.
A report conducted by the International Telecommunication Union (ITU) in 2019 shows a 10 per cent upsurge in mobile broadband penetration yielded a 1.8 % upsurge in GDP for middle-income countries.
Therefore, the tax authorities should make certain the telecom operators' earnings goes up in order that they are able to invest more to deliver digital dividends to every citizen of the united states.
That would mean the united states will adopt the digital economy and everybody knows that is a a lot more efficient economy when compared to age-old analog economy. Hence, the ITU's locating is very much indeed justified.
If anyone even now has any doubt, they should imagine how we would have lived in this pandemic had we not had the digital infrastructure to provide the offerings we are enjoying from your home, rather than reaching out for it risking the chance of contacting coronavirus in the process.
The sector creates one million job opportunities each year and contributes 7 % to the GDP at this time. The telecom infrastructure put in place by the industry has become the crucial enabler for the blossoming mobile financial support (MFS) sector, e-commerce and the digital start-up community like Uber, Pathao and Shohoz. Literally, the digital economy is usually emerging on the trunk of the telecom infrastructure.
But looking at the minimum turnover tax, you may believe that the tax authority would prefer to want you take a sizable draw at the cigarette to ease your nerves than staying connected digitally through the pandemic.
The minimum turnover tax is obviously not the only tax that begs rethinking. Nonetheless it surely may be the most outrageous type of taxation that demands immediate correction. Consider, we happen to be forcing the foreign investors of the sector who possessed brought the highest volume of foreign direct investment in to the country over a long time to park 2 % of their earnings as minimum tax payment. This flies when confronted with all standard pondering around taxation and will not serve the united states when it would go to the global market to look for potential foreign investors.
Bangladesh grabbed global attention when it outlined the vision for an electronic Bangladesh found in '09 2009. The telecom sector responded to the clarion call from the government by minimizing data prices by 99 % since in that case. On the other hand, the tax authority possesses raised the minimum amount tax rate by more than 150 % since 2012 and client tax (supplementary duty, VAT and surcharge) by a lot more than 112 % since 2011. Something is usually seriously wrong here!
The lowest tax rate is reducing the breathing space for the sector, specifically for the smaller operators that contain no option apart from passing the consumer tax completely on the consumers.
Our unique cellular, internet and smartphone penetration stand at around 54 %, 30 % and around 40 % respectively whereas voice provider continues to be contributing 60 % to the industry's revenue. So, there is a dependence on sustained investment to provide the digital dividends to everyone in the society.
We hope that the tax authorities will acknowledge it by shifting the apparatus on the minimal tax rate, to ensure that we can stop driving towards Digital Bangladesh backwards gear.
