As the national budget for the fiscal year 2025-26 draws near, signs are emerging that the government will continue its long-standing policy of imposing a heavy tax burden on the telecom sector. For years, telecom operators have appealed for a more rational tax structure, citing affordability concerns and the sector's strategic role in driving digital inclusion. Yet those appeals have largely gone unanswered. Instead of relief, previous budgets have seen taxes on mobile usage increase, most notably with the supplementary duty rising from 15 to 20 percent in recent years.
The government's rationale is rooted in its pressing need to raise revenue. With an expanding portfolio of development projects and persistent budget deficits, the state relies heavily on sectors like telecommunications for fiscal support. In 2021, the telecom industry contributed taxes equal to 55 percent of its revenue-amounting to around 5 percent of total government income. That proportion underscores the sector's importance in public finance and helps explain the reluctance to ease its tax burden.
International pressure is also a factor. The International Monetary Fund, which has provided financial support to Bangladesh in recent years, continues to urge the government to expand its tax base. This aligns with the broader strategy of maintaining or even slightly increasing taxes in key sectors, including telecommunications, to ensure revenue targets are met.
But these decisions have consequences, and they are already being felt. Bangladesh now has one of the highest combined tax rates on mobile services in South Asia. As of 2024, the effective tax rate on internet services stands at approximately 39 percent, once VAT and sector-specific duties are included. For the average consumer, this translates into higher costs for everyday mobile usage. A Tk 100 recharge yields significantly less in usable credit after taxes, which has led to widespread frustration among users and growing concerns about affordability.
The effects are particularly harsh on low-income households and rural populations, for whom digital access is a lifeline. Whether for education, health services, or connecting to government portals, mobile data has become an essential utility. Yet in Bangladesh, average monthly data consumption is around 6.5 GB-far behind neighboring countries like India, where users consume four to five times more. The affordability gap is a key reason for this disparity, acting as a barrier to digital participation.
Telecom companies, too, are grappling with the pressure. A significant portion of their earnings-roughly 20 percent-goes toward network upgrades and maintenance. These costs have risen further due to the depreciation of the Taka, which increases the cost of importing equipment and software. The result is a constrained industry with limited capacity to invest in next-generation technologies like 4G and 5G. Operators say that high taxes erode their margins and weaken their ability to expand coverage, particularly in underserved areas.
This situation stands in sharp contrast to the government's own aspirations under the "Smart Bangladesh" initiative, which envisions a digitally inclusive society empowered by technology. A high-cost digital environment undermines that vision. It limits access to essential services, stifles innovation, and restricts economic opportunities for millions of citizens. The contradiction is striking: while the government promotes digital transformation as a national goal, its tax policy effectively makes that goal harder to achieve.
The economic implications are not abstract.
The telecom sector contributes an estimated 6.5 percent to Bangladesh's GDP. A weakened sector, burdened by excessive taxation, risks dragging down broader economic growth. It can reduce overall productivity, discourage innovation, and make the country less competitive in attracting foreign direct investment.
If the upcoming budget continues along this path, the likely outcomes are clear.
Consumers will face even greater strain, the digital divide will widen, and the country's progress toward a knowledge-based economy may falter. Investment in critical infrastructure
will slow, and the potential of millions of citizens to participate
in the digital economy will remain untapped.
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