Within years of exploding as the new form of paperless communication it was obvious that in the next phase, Apps and Value Added Services (VAS) were going to take the centre stage. That has come about only to spark a furious argument between telecom operators and the VAS providers. Nor should it come as a surprise that the furore is all about money. No one wants to claim responsibility but both sectors are to blame with government agencies being one of the last to join the fray.
Matters have come to such a pass that GSMA, the world body representing the interests of telecom providers and VAS providers, has finally issued a public statement decrying the apparent onslaught on the industry by regulators. In Bangladesh, VAS companies are clinking glasses after what is a major victory in revenue sharing with operators brokered by the Bangladesh Telecom Regulatory Commission whereby a 60:40 sharing formula has been forwarded to the `Telecom Ministry for approval.
Operators besieged by punitive taxation and back-claims are forking out billions, some of it downright unfair, some of it that hadn't been thought about in making provisions. What used to be exclusive to the tobacco industry -- the golden goose concept -- seems to have taken on a new shape.
With the appointment of Mustafa Jabber as the Minister for ICT, the computer society breathed sighs of relief in anticipation of justice. For the telcos, the worst fear landed at their doorsteps. There have been wrongs and rights abut this industry floating around for years. But as regulators get their act together, giants such as Facebook and Amazon are looking at massive fines that they simply skirted albeit due to loopholes. To be fair, the government of Bangladesh has reneged on a deal struck with operators prior to the 2G licensing renewal procedure relating to back-taxes, unrealistic licence conditions and fees, customs assessment anomalies and out of court settlements. In face of letters from global multinational leaders that bordered on intimidation, the government called the bluff and overrode the crisis.
The operator arguments hold water. Billions of investments in infrastructure and networks aren't made to be given away. Those seeking to jump on to the bandwagon should pay in an ideal situation. But as evinced in the transit treaty with India, Bangladesh has foregone one of the key clinchers in favour of transit by almost erasing transit fees. The spin-off effect has kicked in this case. The caveat is that foreign investors can now be a part of the circus with a 51% stake in VAS operator thereby raising their valuation overnight and allowing operators to play the game as well.
So when there's a protest over a perceived VAT at the rate of 5.0% on VAS services, it becomes a double whammy. Apart from the predictable rambling over discouragement for VAS players, the VAT will have an inevitable impact on the end-consumer in the form of another tax on tax. This is what the Finance Minister promised to weed out of the system. Political promises are often made to play to the galleries; and, such promises may also be broken. There is a possibility that this could be one of those in the basket of possibilities that governments have on hand to horsetrade with.
The budget proposal of charging VAT on Uber and Pathao owners' earnings suggests the taxman is literally scraping the bottom of the barrel. Convenience of electronic payment along with cash isn't a luxury in an unstructured retail system. Bikash transactions introduced to make check-outs and bill payment easier trip over in crucial conditions. VISA card holders were left out on a limb following a technical glitch. Thankfully, the Gurus of IT had a simple suggestion for consumers. Carry some old-fashioned money with you.
As matters stand, subscribers are having to fork out nearly 12% on bills for telecom facilities with mobile phones in the form of surcharge, supplementary duty and VAT. Any new levy will have to be on top of that. Bangladesh still defies the global trend of declining calls, texts and an increase in data. So further squeezing the small but growing tendency addresses revenue shortages.
The volume versus value equation won't match but it's a beginning. The government also wants a piece of the online business revenue looking to tax giants and minnows on online sales and advertising sales. Amazon is largely accused of bypassing normal customs duties due to online sales and are preparing for a hit. Google's tax returns in Europe have been questioned due to relatively low figures.
That largely vindicates the nascent VAS Business. Amazon was allowed to grow and grow big before being called on to be a big boy taxpayer. In Bangladesh the time is not now.
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