FY ‘21 budget proposals: MNOs suggest tax policy reform for telecom sector


FE Report | Published: May 08, 2020 09:29:59 | Updated: May 08, 2020 12:27:50


Budget: MNOs suggest tax policy reform for telecom sector

The country's Mobile Network Operators (MNOs) have called upon the tax authority to bring in reforms in the tax policy for telecommunication industry to reap more benefit from them, according to the MNOs' budget proposals for the upcoming fiscal year (FY), 2020-21.

Association of Mobile Telecom Operators of Bangladesh (AMTOB) placed the proposals to National Board of Revenue (NBR) on Thursday.

Rationalisation of corporate income tax, elimination of SIM tax, minimum turnover tax and double taxation, and VAT exemption for the government's regulatory agencies are among the MNOs' demands to increase their contribution to the country's Gross Domestic Product (GDP).

According to a press statement, the mobile operators said their contribution to GDP is currently 7.0 per cent, which may significantly increase following proper tax policy reform.

AMTOB President Mahtab Uddin Ahmed said the whole country is now facing unprecedented challenges due to the COVID-19 outbreak, and telecom eco-system is no exception from that.

In this situation, telecommunication has become the backbone of all sorts of communication, businesses, and entertainment etc.

"We promise to keep serving the nation during the crisis as we have done before. However, since the sector has already been going through multiple issues regarding taxation, it is time to find solutions to them for encouraging the industry to add more value to the nation in the coming days," he opined in the statement.

The AMTOB budget proposals said existing SIM tax of Tk 200 per SIM is a major barrier for the MNOs to take their service to the lower-income generating people.

"Elimination of the SIM tax regime will support mobile penetration in deep rural areas for greater benefit of the national economy and the telecommunication industry."

The AMTOB proposals also said current corporate tax for the mobile industry in Bangladesh is 45 per cent, which is 22 per cent in India, 30 per cent in Pakistan and Nepal, 28 per cent in Sri Lanka, and 20 per cent in Afghanistan.

AMTOB requested rationalising the corporate tax to 30 per cent, the same standard rate for other companies in Bangladesh.

The mobile operators said minimum turnover tax is against the spirit of income tax. The operators, who are incurring loss or generating profit of less than 2.0 per cent of their revenue, are paying this tax from the equity injected by shareholders.

The MNOs urged NBR to eliminate minimum turnover or corporate tax to foster sustainability of the industry.

One of the proposals said the new VAT and SD Act 2012 does not have specific guidelines for VAT exemption for the government's regulatory agencies. The agencies are not following the VAT regulation.

It said the regulatory agencies are demanding or collecting VAT without registration, and are not issuing any VAT challan, which goes against the principle of VAT law.

AMTOB proposed VAT exemption for the regulatory agencies, including Bangladesh Telecommunication Regulatory Commission (BTRC), to ensure consistency in regulation. It will reduce complexity, non-value adding administration, and avoid potential disputes for both the parties - NBR and operators.

The statement said MNOs of Bangladesh pay 5.5 per cent of their gross revenue as shared revenue and one per cent as Social Obligation Fund (SOF) to BTRC.

"At the initial stage, VAT is paid for the revenue, which is shared with BTRC. If VAT is paid again for the same revenue that is shared with BTRC, then it will be double-taxed, which is ultra vires of the VAT law."

AMTOB opined that revenue sharing should be exempted from VAT payment on the ground of double taxation.

AMTOB Secretary General Brig Gen (Retd) S M Farhad said licensing segmentation of the MNOs over the period has narrowed down the growth opportunities. Thus, it limits the growth opportunity for the government's revenue stream as well.

He also said at the same time, imposing VAT deduction at source according to the VAT law of 1991 will also increase revenue.

Besides, 4G penetration is still very slow in the country due to high price of compatible handsets, which requires special attention.

S M Farhad also said the coronavirus situation is already negatively impacting the operators by causing substantial dent in revenue.

"We solemnly request the government to consider our proposals, so that the industry can help the country with its full potentials and contribute more to the national GDP," he added in the statement.

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