Proper tax reform on mobile phones would increase contributions to GDP

Special Correspondent,, Dhaka
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AMTOB, an association of mobile phone service providers, believe that with proper policy reform, the current contribution of the mobile industry to the Gross Domestic Product (GDP) is possible to increase from seven percent in future.

What kind of tax reform will come in the next budget will bring good for the mobile sector and this service, AMTOB has recently raised some such proposals to the National Board of Revenue (NBR). The Global Mobile Communications Systems Association (GSMA), a global mobile company, said the mobile industry currently contributes seven percent to Bangladesh's GDP.

Mahtab Uddin Ahmed, president of the Association of Mobile Telecom Operators of Bangladesh (AMTOB), said the whole country was in an unprecedented crisis due to the outbreak of coron (Covid-19) Pandemic. The mobile industry is no exception. In this situation mobile industry has become the backbone of all types of communication, business, entertainment etc. We are providing proper service in this difficult time as in other times. However, since this sector is already suffering from various problems including taxes, now is the time to eliminate these and encourage this sector so that we can provide more services to the nation in the future.

AMTOB has requested the NBR to consider the following key issues:

1. Abolition of SIM tax: At present tax needs to be abolished at the rate of Taka 200 per SIM. This is because it is considered a major barrier to low-income people receiving this service. Operators give this money as subsidy.

2. Corporate tax rationalization: The current corporate tax for mobile industry in the country is 45%, which is 22% in India, 30% in Pakistan and Nepal, 28% in Sri Lanka and 20% in Afghanistan. AMTOB has requested to reduce the corporate tax to 30% at a reasonable rate like other institutions in the country.

3. Minimum turnover / elimination of corporate tax: The provision of minimum turnover tax is against the policy of income tax. If the mobile operators make a loss or earn less than 2% of the profit, they have to pay this tax at the rate of 2%. Shareholders have to pay this tax from their equity. It has been requested to remove the minimum turnover tax to keep the industry afloat.

4. VAT exemption for regulatory bodies including BTRC: The new VAT and SD Act of 2012 do not have clear guidelines for VAT exemption for government and regulatory bodies; These companies are not following the VAT policy. Regulatory agencies are claiming or collecting VAT without their registration, again not issuing any VAT invoices. This is against the principles of VAT law. AMTOB has offered VAT exemption to government regulators, which, if implemented, would resolve potential disputes and complications between both the NBR and the operator.

5. Dual tax avoidance: The country's mobile service providers contribute 5.5 percent of their total revenue to the Bangladesh Telecommunications Regulatory Commission (BTRC) as part of its revenue and 1 percent to the Social Obligations Fund (SOF). In the initial stage, VAT is paid for revenue, part of which is paid to BTRC. When VAT is paid again for the same revenue paid to BTRC, it becomes a double tax. AMTOB has proposed to avoid double taxation in paying revenue.
AMTOB Secretary General Brigadier General (Rtd) SM Forhad said that in the past, the licenses of mobile service providers have been divided in various ways and their business has shrunk. The contraction of operators' business has also limited the government's growth opportunities.

On the other hand, even if the policy of VAT exemption at source is brought back as per the VAT Act of 1991, it is possible to increase the revenue of the government. Due to the high price of 4-G technology handsets, the use of 4-G in the country is progressing at a very slow pace. In this case special incentives need to be given.

SM Forhad added that it is still difficult to predict what will happen to corona, but if regulatory, tax and VAT issues are not addressed immediately; mobile services will soon face huge challenges. The corona situation is already having a negative impact on the revenue of the operators. We sincerely request the government to consider our proposals so that this industry can help the country to its full potential and contribute more to the GDP.