The recent increase in supplementary duties on mobile and internet services in Bangladesh marks a significant policy shift that could have far-reaching consequences for its citizens and the broader economy.
The government’s decision to raise the supplementary duty on mobile services to 23% and impose a new 10% supplementary duty on internet services comes at a time when digital connectivity is increasingly essential for education, business, and daily life.
This policy, while aimed at increasing government revenue, may inadvertently deepen the digital divide, disproportionately affect low-income populations, and stifle the growth of the country’s digital ecosystem.
Bangladesh has witnessed remarkable progress in digital connectivity over the past decade. As of early 2024, the country boasted 188.6 million active mobile connections, equating to 108.5% of the total population, and 77.36 million internet users, reflecting an internet penetration rate of 44.5%.
These statistics underscore the centrality of digital tools in the lives of Bangladeshi citizens, from facilitating remote education to enabling small businesses to thrive in a competitive market. However, recent data indicates a concerning trend: a reduction of 4.38 million mobile internet subscribers in November 2024, the largest single-month decline since August 2021. This decline signals that rising costs may already be deterring users from maintaining their subscriptions, a problem likely to be exacerbated by the new tax measures.
The increase in duties has immediate financial implications for consumers. Previously, a 100Tk mobile recharge would incur 54.6 in taxes, including supplementary duty, VAT, and surcharges. With the new supplementary duty rate, this tax burden rises to Tk56.3, leaving consumers with only 43.7 worth of usable balance. Similarly, for internet services, the imposition of a 10% supplementary duty means that for a Tk500 internet bill, the total tax burden increases to Tk77.5 from 25. In the case of a Tk1000 internet package, the price now climbs to 1155. These cost increases are substantial, especially for students, small entrepreneurs, and rural users who already operate on tight budgets.
The digital divide—the gap between those who have access to digital technologies and those who do not—is a longstanding issue in Bangladesh. Urban areas typically enjoy better digital infrastructure and higher rates of digital literacy, whereas rural areas often lag behind. Affordable mobile and internet services have played a crucial role in bridging this gap, but the new tax measures threaten to undo much of this progress.
For many low-income families in rural areas, the additional costs could render mobile and internet services unaffordable, forcing them to disconnect or limit usage. This will likely exacerbate existing inequalities, as access to information and opportunities increasingly relies on digital connectivity.
Students are among the groups most vulnerable to these changes. During the COVID-19 pandemic, online learning became a lifeline for education. However, many students in rural and low-income households struggled to afford devices and internet services.
The new tax hikes could further restrict access to education, widening the educational gap between urban and rural areas. Small businesses and freelancers, who rely heavily on affordable internet for operations and client communications, will also face increased costs. This could make their services less competitive, both locally and internationally, and reduce their contribution to the economy.
The broader economic implications are equally concerning. Digital services are a cornerstone of modern economies, driving innovation, efficiency, and inclusivity. By making these services more expensive, the government risks stifling the growth of Bangladesh’s digital economy. The ICT sector, which has been a significant driver of job creation and foreign investment, could face setbacks. Higher costs may lead to a reduction in the number of internet users, decreasing demand for digital services and potentially causing a slowdown in sector growth. Additionally, telecommunications operators may see reduced revenues, which could limit their ability to invest in infrastructure improvements, further affecting service quality and accessibility.
Industry experts and stakeholders have expressed concerns about the potential long-term effects of these tax measures. Lt Col (retd) Mohammad Zulfikar(retd.), secretary general of the Mobile Telecom Operators of Bangladesh (AMTOB), has warned that the higher costs could hinder mobile and internet usage among low-income groups and students. This, in turn, could reduce operators’ revenues and subsequently lower government tax collections (Views Bangladesh, 14 January 2025).
Aminul Hakim, chairperson of the Bangladesh Internet Governance Forum (BIGF) and president of the International Internet Gateway Association of Bangladesh (IIGAB) has criticised the multiple layers of taxation on the same product. He pointed out that the government already collects substantial revenues through various channels, and the new supplementary duties only add to the burden on consumers and businesses (Views Bangladesh, 14 January 2025).
One of the most critical questions arising from these developments is whether the government considers internet services a basic necessity or a luxury. The imposition of supplementary duty on internet services suggests the latter, equating it to products like tobacco, which are taxed heavily due to their non-essential nature.
However, in today’s interconnected world, internet access is widely recognised as a fundamental right and a key enabler of development. Treating it as a luxury risks sidelining large segments of the population from the benefits of digital transformation.
The digital divide and rising costs have broader societal implications. Increased digital exclusion could hinder efforts to achieve the United Nations Sustainable Development Goals (SDGs), particularly those related to education, economic growth, and reducing inequalities. In a country like Bangladesh, where digital initiatives have played a pivotal role in improving healthcare, education, and governance, such setbacks could have long-term consequences.
To address these challenges, policymakers must adopt a balanced approach. The government should reconsider the supplementary duties and explore alternative revenue-generation strategies that do not disproportionately burden consumers. Providing subsidies for low-income users, particularly students and small businesses, could help mitigate the impact of higher costs. Investments in rural digital infrastructure are also crucial to ensure equitable access to high-quality services. Stakeholder engagement is essential in shaping policies that align with the country’s long-term development goals while addressing short-term fiscal needs.
Moreover, transparency in how additional revenues are utilised is vital. If these funds are directed towards improving digital infrastructure, education, and healthcare, the public may be more willing to accept the higher costs. However, without clear communication and visible benefits, these measures could erode public trust and further alienate already marginalised groups.
The increase in duties on mobile and internet services in Bangladesh presents significant challenges for consumers, businesses, and the economy as a whole. While the government’s need to increase revenue is understandable, the unintended consequences of these measures risk outweighing the benefits. By prioritising digital inclusion and adopting a more nuanced approach to taxation, Bangladesh can continue its journey towards becoming a digitally empowered nation, ensuring that progress is shared equitably across all segments of society.
