Representative photo of the network tower. BIGSTOCK
Telecom operators pay 45% corporation tax, the same as tobacco manufacturers pay the government
Mobile network operators in Bangladesh are aiming for tax reforms in the upcoming state budget to accelerate the digital economy as well as a low-cost VAT system to drive the digital transformation of the next level in the upcoming budget. They suggested removing the SIM tax as well.
During a meeting with the chairman of the National Board of Revenue (NBR) in his office in the capital, representatives of the Association of Mobile Operators of Bangladesh (AMTOB) also proposed that the SIM tax be eliminated altogether.
According to AMTOB, the taxes imposed on cellular operators are higher than those from other sectors in the country, not to mention the corporate tax rate is the highest in Asia.
For listed companies it is 40 percent, for non-traded companies 45 percent and for commercial banks, banks, insurance companies and non-bank financial institutions 37.5 percent.
For unlisted banks and other financial institutions it is 40 percent.
However, telecom operators pay 45 percent corporate tax, as much as what tobacco manufacturers pay the government.
AMTOB therefore believes that investment in the telecommunications sector is stagnating for this reason. They pushed for it to be reduced to 32.5 percent.
The industry contributed Tk 16,523 crore to national sales in 2020, 2.6 times more than in 2010, the organization said.
Cellular operators said their voices should be heard as the mobile internet powers the digital economy amid the Covid-19 pandemic in terms of advancing government services, digital payments, education, e-commerce, health, agriculture and ridesharing / delivery services.
Not only have high tax rates diverted investment away from the sector, they have also resulted in a drop in revenue, said Shahed Alam, chief corporate and regulatory officer at Robi.
They also urged the NBR to consider recognizing legitimate business expenses as eligible expenses.
Only 8 percent of the total profit is allowed as fees for technical know-how. As a technology-based company, mobile network operators always need technical, knowledge-based services. The provision of new technologies such as 4G, 5G, IoT and blockchain requires technical support from global experts.
The industry suggested setting a 6 percent limit based on sales, not profit.
Currently, banking, insurance or financial institution services are exempt from tax, but telecommunications services are not exempt from tax.
Since cellular network operators have a large number of corporate customers, it is impossible to obtain a tax certificate from all corporate customers in due course.
Against this background, AMTOB proposed that telecommunications service sources should be exempted from withholding taxes in accordance with Section 52A (16) of the 1984 Income Tax Ordinance.
AMTOB also said that the cost of new SIM cards and SIM replacement fees increased from Tk 100 to Tk 200 in 2019. If the SIM tax can be eliminated, the cost of services will decrease by 1.7 percent.
“The government imposes new tax burdens on the mobile communications sector every year. We call on the government to end this situation and create a business-friendly environment,” said Brigadier General SM Farhad (ret.), General Secretary of AMTOB.
Her further recommendations included withdrawing or lowering sales tax of 2 percent on telecommunications companies even if they are not making a profit, lowering corporate tax on unlisted and listed operators to 32.5 percent and 25 percent, respectively, and lowering sales tax. SD and surcharge of 33.25 percent and 21.75 percent for talk time and Internet use for each Tk 100.
They also called on the NBR to provide clear VAT exemption guidelines for government agencies and streamline interest on unpaid VAT.