Taxation inhibits ICT use, addl foreign investment

FE Report

Bangladesh should substantially slash taxes on ICT (information and communication technology) services to push ahead the digital Bangladesh policy, an economist said Wednesday.

A global study conducted by Miller and Atkinson has found Bangladesh's tax rate on ICT services to be highest at 58 per cent among 125 countries in the world.  This compares with only 3.0 per cent in China.

"This (reduction) will be a win-win policy because a larger subscription volume will both benefit services expansion and total tax revenues from the ICT," Dr Sadiq Ahmed, vice chairman of the Policy Research Institute (PRI), said.

He made the recommendation while presenting the keynote at a seminar on "Strengthening the ICT Revolution in Bangladesh," organised by PRI Wednesday at a city hotel. The seminar was moderated by PRI chairman Dr Zaidi Sattar.

"In the global context, Bangladesh is clearly an outlier in the matter of high ICT taxation," he said.

Referring to the study, he said price elasticity for Bangladesh is also high.

"… These taxes are a major reason for the low use of ICT services in Bangladesh relative to other countries," he said.  "This raises serious concerns about the government's priority given to the spread of the ICT revolution".

He noted that foreign investors are reluctant to further invest in new mobile network or acquire additional radio spectrum in view of low profitability.

He said high taxation on ICT services is clearly inconsistent with the prime minister's digital Bangladesh policy.

"This inconsistent taxation policy to the stated development objectives and the PM's initiative must be reviewed carefully and addressed speedily," the Boston University-trained economist noted.

He said in the global context, ICT performance of the country is considerably poor. In the global ranking of the ICT development index done by the International Telecommunication Union (ITU) shows that as of the calendar year 2013, Bangladesh ranks 145th out 166 countries compared.

This performance is also below other major South Asian countries, except Afghanistan.

The economist said although ICT export grew from $150 million in 2010 to $450 million in 2014, but the figure is much below the potential one.

He noted that India earned $72 billion from the exports of the ICT services in the same period. "Even after allowing for size effects to 4.3 per cent of GDP of India, whereas it is less than 0.3 per cent of GDP in Bangladesh," he added.

Mr Ahmed said the government should set a target of increasing the country's penetration into the global ICT market through a well thought-out ICT strategy.

Prime minister's economic affairs advisor Dr Mashiur Rahman addressed the event as chief guest, while chairman of the parliamentary standing committee on telecommunications and ICT Imran Ahmad and GSMA representative Henry Parker also spoke.

In a separate presentation, GSMA representative Mr Parker said over 17 per cent of the cost of buying and using a mobile is accounted for by taxes. He said including additional one-off payment, 55 per cent all revenue earnings of the operators was paid in tax and fees in 2013.

Supporting the tax reduction demand, parliamentary committee Chief Mr Ahmad said reducing taxes on the ICT services could significantly change the country's total economic scenario.

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