Rationalising tax collection

It is common knowledge that loans from the Bretton Woods Institutions come with strings attached. At a time of financial crisis which was its own making, the deposed government of Sheikh Hasina had to accept International Monetary Fund (IMF)-dictated recipe along with its loan amounting to $4.7 billion. As part of that recipe, the interim government has to mobilise additional taxes of Tk 120 billion to the amount already set for and this too within the next six months. This exigency has compelled the government to look for various sources of revenue generation. Only recently did the government raise value added tax (VAT) on 43 types of commodities and services in order to augment tax collection. Now reports have it that a 3.0 per cent rise in taxes on cell (mobile)-phone talk time is under consideration. In June, last year, the supplementary duty (SD) was raised from 15 per cent to 20 per cent, now it will be 23 per cent. A customer, as an official of the leading private telecom operator calculates, will have to pay Tk142.45 compared with 133.25 now being paid.

With the increase in government tax on talk time, the telecom operators have also raised their service charges and the customers or subscribers have to bear the burden of the additional costs. Unsurprisingly, GSM (Groupe Special Mobile or Global system for Mobile Communications) Association, a non-profit organisation that represents the interests of telecom operators worldwide, found that the total taxes on and fees for mobile use in Bangladesh was 55 per cent--- highest in the world in 2021 as against the 22 per cent global average. Compared to Bangladesh, in Sub-Sahara region, it is 35 per cent, in the Middle East and North Africa, Asia and the Pacific it comes to 24 per cent. So the proposed rise in taxes will have multi-dimensional adverse impacts on subscribers, particularly on villagers among whom the overwhelming majority use button-based feature phones. According to a report of the GSMA, only 26 per cent villagers use smartphones.

Clearly, villagers using feature phones will be at a further disadvantage whereas smartphone users have apps to talk and cut the cost. The digital divide will widen further. Already the number of mobile phone and internet users registered a decline in November by a sizeable margin compared to June last. An update on this may present the real picture. Already low-income people reeling from inflationary pressure have been forced to squeeze on their consumption of even dietary items. It is quite logical they have to cut on expenditure on mobile phone.

According to yet another report, the government is mulling over increasing direct and indirect taxes on 65-70 products and services. That is expected to fuel the inflation, right now eased a little on account of increased supply of vegetables, further in the lean season. When the waiver of taxes on rice import, and the lowering of duties on some essentials including cooking oil and sugar have not found any reflection on the price lines, what duty rise will do is anybody's guess. Instead of looking for the easy option of raising VAT, it would be wiser to strengthen the National Board of Revenue so that it can launch an effective drive to bring the huge number of untaxed people and outlets under an expanded tax network.