Govt mum on tax on SIM and mobile sets

June 13th, 2010

Even before the budget for fiscal 2010-11 was placed in parliament, industry players and some government officials felt it was necessary the SIM taxes be abolished or slashed to propel the sector forward. However, Finance Minister AMA Muhith chose to be hush on the matter.

The proposed budget did however focus on linking the rural community under telecommunication networks. But it would be impossible to do so without addressing the SIM (subscriber identity module) taxes or mobile handset taxes, said industry people.

Telecom operators have expressed frustration over the proposed budget as growth of the sector in the mostly untapped rural markets may be hampered unless the taxes are at a minimum.

Speaking at a programme in Dhaka on May 13, both the secretary of the telecom ministry and chairman of Bangladesh Telecommunication Regulatory Commission assured the industry people that the budget would focus on rational taxation for the telecom industry.

But the issue was completely overlooked.

Even some government officials at different programmes said the current budget does not reflect anything in favour of the information and communication industry, with which the government can achieve its goal to make a Digital Bangladesh by 2021.

So, operators had high hopes for the proposed budget for the next fiscal year.

The six mobile operators now serve 5.6 crore customers, while the eleven landline operators brought 12 lakh customers under their networks. All these operators pay Tk 800 as connection tax, on behalf of their customers, due to stiff competition.

The telecom sector pays Tk 5,000 crore in taxes a year on average to the national exchequer. The government earns the revenues from SIM tax, equipment import tax, yearly revenue sharing and VAT (value added tax).

The SIM tax accounts for 20 percent of the government’s total earnings from the sector.

“We are completely frustrated, as the issues were not address in the budget,” said Zakiul Islam, president of the Association of Mobile Telecom Operators Bangladesh (AMTOB).

He said if the SIM tax is not withdrawn finally, operators will continue subsidising for the sake of competition. But customers will not really get what they deserve from the industry, he added.

According to the finance minister’s budget speech, Bangladesh’s telecom penetration rate is around 38 percent, which means that 62 percent is still beyond the reach of telecom services.

The president of AMTOB said these people are living in rural areas and have no capacity to spend the same amount of money on telecom services as the urban population.

The digital divide between the rural and the urban population will widen due to the high taxes, Islam said. Operators may also not be willing to go for massive expansion in the rural areas, as there is not much business return, he added.

Mobile handset importers had also appealed to the government to fix the import duty on each handset at Tk 100, as they claimed that the existing tax structure encourages traders to dodge import taxes.

In line with the current budget, handset importers have to pay duties worth 12 percent of the value of the handset.

The proposed budget has nothing new for the importers. The duty structure for handset imports remained same.

“We don’t know what actually happened,” said Faisal Alim, secretary general of Bangladesh Mobile Phone Importers Association (BMPIA).

“We are completely in the dark about what the budget stated.”

The fast-growing mobile market requires 7.5 lakh mobile sets a month, of which, 5.6 lakh are imported through legal channels, according to BMPIA.

Mostofa Jabbar, president of Bangladesh Computer Samity, said the budget proposed some good initiatives, it had some lacking as well.

“Bypassing the cut in taxes on SIM and handsets is one of them.”

The government should address the issue immediately if it truly believes in building a Digital Bangladesh by 2021, said Jabbar.

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