‘Cut corporate tax rate for mobile phone operators’

FE Report | Tuesday, 24 April 2018

The global trade body of the mobile operators, GSM Association, has called for a reduction in corporate tax rate for the mobile phone operators in Bangladesh, saying that the existing tax rate can negatively impact the future market development.
Bangladesh has the highest corporate tax rate in South Asia, at 45 per cent, which constrains mobile phone operators' profit and will impact on the future investment, GSMA officials said at the launching ceremony of the Country Overview Report in the capital on Sunday.
They called for reduction in tax rate from 45 per cent to 40 per cent for the mobile operators in the private sector and from 40 per cent to 35 per cent for state-owned operators.
They also called for withdrawal of the 35 per cent supplementary duty and the 15 per cent VAT on SIM and the 5.0 per cent supplementary duty on mobile services as well.
Emanuela Lecchi, Acting Head of Asia Pacific unit of GSMA, said lowering these taxes would reduce the distortions arising from sector-specific taxation. It would enhance the affordability of mobile services and stimulate demand, increasing both new subscriber penetration and greater usage.
GSMA experts noted that mobile-specific taxes are equivalent to 13 per cent of the total mobile sector revenue in Bangladesh. The figure is greater than in India (11 per cent), Malaysia (11 per cent) and Thailand (10 per cent).
They also observed that the lack of affordability of mobile services in Bangladesh is exacerbated by the high levels of taxation on usage and devices.
"Taxes on the usage of mobile services in Bangladesh represent a higher share of tariff costs than in a number of neighbouring countries, including India," said Lecchi.
"Taxes also represent a relatively high proportion of device costs, compared to other countries in the region," she added.
The GSMA experts also noted that in addition to taxation, mobile operators in Bangladesh also have to pay very high auction prices for the use of the spectrum.
The reserve prices for the 1800 MHz, 2100 MHz, and 900 MHz bands are high in comparison to other developed markets in Asia Pacific and Europe that have auctioned the same bands in recent times, they said.
Noting that approximately 50 per cent of the population of Bangladesh does not have a mobile phone while the unique penetration of mobile internet users is only 21 per cent, the GSMA officials observed that there is significant scope of further growth in the telecom market of the country.
Penetration of 3G and 4G services is expected to grow to 58 per cent by 2021. This still leaves over 40 per cent of the population without access to modern mobile technologies, they said.
The GSMA officials observed that an increased mobile connectivity can drive economy-wide productivity gains and can stimulate other sectors of the economy.
Greater penetration of mobile services will increase the ease of doing business and also generate employment in the wider ICT sector and the wider economy, Lecchi said.
"Increased Mobile Money penetration can also increase fiscal collection while it also leads to greater financial inclusion which leads to a smaller informal economy, boosting tax collection rates," she added.
Chief Corporate and Regulatory Affairs Officer of Banglalink Taimur Rahman, Head of Regulatory Affairs of Robi Axiata Shahed Alam and Secretary General of Association of Mobile Telecom Operators of Bangladesh TIM Nurul Kabir were present at the event.

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