Finance Minister AMA Muhith has proposed five per cent Value Added Tax (VAT) on online shopping for the coming fiscal starting on June 30.
“With the fast development of internet technology, social media and mobile application platform-based virtual business is booming,” he said in the proposed budget presented in parliament on Thursday.
Muhith also proposed a new service code, ‘Virtual Business’, on which five per cent VAT shall be imposed in order to bring online businesses within the tax net.
E-commerce entrepreneurs have expressed concern that the VAT may harm their booming business, reports bdnews24.com.
“Many will lose interest in e-commerce and F-commerce (Facebook commerce) if the costs go up in this sector,” said E-Commerce Association of Bangladesh (E-CAB) General Secretary Abdul Wahed Tomal.
He said currently around 1,000 online shops are operating in Bangladesh and more than 1,000 firms are based on e-commerce. The number of F-commerce or Facebook commerce entities is around 25,000.
Muhith also said Bangladesh’s economy is far more open now with the significant change in volume and nature of cross-border transactions.
“As a result, the risk of tax avoidance has significantly increased. Many foreign entities are earning money in Bangladesh through virtual and digital transactions, but we are not getting adequate tax from them,” he said.
But Bangladesh’s tax laws are not sufficiently up-to-date to bring all virtual transactions under the tax net as the virtual and digital business transactions are comparatively new, the finance minister observed.
He added introducing new provisions in tax laws regarding the taxation of virtual and digital sectors such as Facebook, Google, YouTube etc on their income earned in Bangladesh will expand the tax base.