The recent decision by the government to impose an additional 5% supplementary duty on mobile service usage and a Tk100 increase in the Value Added Tax (VAT) on SIM connections is expected to have a substantial negative impact on both mobile consumers and the telecommunications industry in Bangladesh.
Higher service prices have historically led customers to reduce their mobile phone usage, resulting in lower revenue collection and decreased contributions to the government treasury.
The increase in VAT on SIM connections, from Tk200 to Tk300, is also likely to deter the growth of new mobile subscribers.
These measures have resulted in the highest mobile service tax rates in South Asia, and coupled with high inflation, they threaten to stifle industry growth and innovation.
At a post-budget press conference held at the Association of Mobile Telecom Operators of Bangladesh (AMTOB) secretariat in Banani, Dhaka, industry representatives voiced their concerns.
Taimur Rahman, chief corporate and regulatory affairs officer of Banglalink, said, “The additional taxes will significantly burden consumers and slow down the sector’s growth.”
Shahed Alam, chief corporate and regulatory affairs officer of Robi Axiata, echoed this sentiment, adding, “We have repeatedly requested the government to rationalise mobile sector taxes, but our recommendations have not been reflected in the national budget proposal.”
Hans Martin Henrichsen, chief corporate affairs officer of Grameenphone, expressed concern over the broader economic impact, saying, “The increased tax will have far-reaching effects on the economy, deterring new subscribers and reducing overall mobile usage.”
Lt Col Mohammad Zulfikar (Retd.), secretary general of AMTOB, highlighted the regional disparity in tax rates, noting, “Bangladesh now has the highest mobile service tax rates in South Asia.”
According to data from the Bangladesh Telecommunication Regulatory Commission (BTRC), over 12 crore out of 19.22 crore SIM card holders in the country use the internet. Despite the progress towards a “Smart Bangladesh,” 40 to 45 % of the population remains unconnected.
Bangladesh lags significantly behind neighbouring countries in data usage at the customer level, but there is substantial potential for growth in this sector.
With the new tax imposition, customers will now have to pay Tk139 to avail mobile services worth Tk100, making it the highest in South Asia.
Currently, a mobile internet customer in Bangladesh uses an average of 6.5 gigabytes (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 reveals: 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% of the population remains without telecom services.
Among current mobile service users, 63 percent use mobile internet and 54 percent are 4G subscribers. This indicates significant potential for growth, as many users are yet to adopt mobile internet and 4G services.
The additional 5% supplementary duty is expected to generate about Tk1.5 billion in revenue.
This revenue, however, could be achieved by increasing data usage instead of raising levies.
Shahed Alam said, “The current policy contradicts the vision of Smart Bangladesh. 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.”
