Taxes and fees as a percentage of mobile sector revenues in Bangladesh are more than double the Asia Pacific average, subsequently leaving a negative impact on access and use of mobile technology, says a GSMA report released yesterday.

In 2020, the total tax contribution of the mobile sector amounted to Tk 133 billion, equivalent to 49.8 per cent of mobile sector revenues, according to the report titled "Taxation of the mobile industry in Bangladesh".

This is higher than that in 2019, when the total tax contribution amounted to Tk 119 billion and represented about 44 per cent of the sector's revenue.

In contrast, average taxes and fees as a percentage of mobile sector revenues in the Asia Pacific nations is 24 per cent while the global average is 22 per cent.

When annualised one-off spectrum licence fees are taken into account, the total tax contribution of the mobile sector represents 53 per cent of the revenue in 2020, up from 49 per cent in 2019.

The mobile industry in Bangladesh contributes heavily to the government exchequer, said the report of The Groupe Speciale Mobile Association (GSMA), which represents mobile operators worldwide.

Well over half of this taxation, that is 61 per cent, is in the form of sector-specific taxes and fees, including consumer taxes, making services less affordable at a time when digital inclusion is an imperative.

Corporate taxes and minimum turnover tax account for nearly a quarter of the tax contribution by the mobile sector. These taxes for the mobile sector are the highest among all sectors in the country and stifle the sustainability of the sector.

Despite the already significant contribution to the exchequer, the mobile sector's contribution as a proportion of total government tax revenue increased to around 5 per cent in 2020 from 4.4 per cent in 2019, said the report.

According to the report, Bangladesh set out its vision to become a digital nation in 2009 and it brought good results.

However, progress has slowed in the 4G era.

Despite the expansion of mobile coverage throughout the country and total mobile connections and mobile internet connections at 181 million and 124 million respectively as of December 2021, there remains a significant unconnected population in terms of unique subscribers.

The GSMA estimates that about half of Bangladesh's population remains to be connected to a mobile network, as unique subscriber penetration was at 55 per cent.

Moreover, only 31 per cent of the population, taking into account unique penetration, are using mobile internet services. This is lower than the average in South Asia.

The report recommends a conducive regulatory environment, especially the tax framework, to accelerate digital transformation and maximise the benefits of connectivity.

This is particularly relevant as Bangladesh now faces the challenge of penetrating low-income groups to connect the unconnected.

It said Bangladesh needs to attract foreign direct investment (FDI) to create a robust 5G network and spur innovation on that network through new services for consumers and industries to realise "Smart Bangladesh".

The GSMA also recommends that the government align mobile sector taxation levels with the rest of the economy, reduce sector-specific taxes and streamline the tax assessment mechanism.

It suggests tax reform in three key areas to accelerate the digital economy.

First, the government should align mobile sector taxation levels with the rest of the economy.

For example, it should remove the minimum turnover tax or reduce it from 2 per cent to 0.5 per cent initially and to 0.25 per cent in a second phase to align it with the rest of the economy.

Recently the Federation of Bangladesh Chambers of Commerce and Industry also recommended lifting the minimum turnover tax.

Further, it should reduce the corporate tax for non-public mobile operators from 45 per cent to 30 per cent and for public mobile operators from 40 per cent to 22.5 per cent.

Second, the government should reduce sector-specific taxes on mobile consumers by removing the SIM tax of Tk 200.

It should eliminate the supplementary duty of 15 per cent and surcharge of 1 per cent on mobile internet as well as on the purchase of non-telecom services using airtime.

The government should consider the operators' demand on slashing corporate tax, said Shyam Sunder Sikder, chairman of Bangladesh Telecommunication Regulatory Commission (BTRC), in a recent event.

The rationale is that mobile operators have to continue investing big to keep up with rapidly changing technology, he said.

Sikder said the operators, however, have to substantially make improvements in ensuring quality of service as there were frequent call drops while data service was of low quality.

Contacted, Subrata Roy Maitra, vice-chairman of the BTRC, said leaders of the Association of Mobile Telecom Operators of Bangladesh placed a set of demands for tax cuts and it has already been sent to the finance ministry.