As Bangladesh advances towards its technology-driven Smart Bangladesh Vision 2041, the telecom industry emerges as a crucial sector catalyzing this transformation. The telecommunications sector in Bangladesh significantly contributes to the national economy, adding over $13 billion to the GDP and generating more than 800,000 jobs. It serves as the backbone for various other sectors, including finance, healthcare, education, and commerce, by providing essential communication infrastructure.
Mobile operators in Bangladesh are at the forefront of this vision, offering innovative digital services to millions. With substantial investments of around 150,000 crore in infrastructure, these operators are enhancing connectivity, facilitating digital inclusion, and enabling broader participation in the digital economy, thereby driving economic growth.
The sector's role in economic development is multifaceted, encompassing direct contributions through revenue gener- ation and indirect contributions by enabling other industries to thrive. By supporting the government's Smart Bangla- desh Vision, the telecom sector facilitates digital services such as e-governance, online education, telemedicine, and digital commerce, which are essential components for achieving the vision.
Despite its critical role, the telecom sector in Bangladesh faces significant challenges, with unpredictable taxation being a major hindrance. The tax regime for telecom operators in Bangladesh is highly volatile, with frequent changes in tax laws and high tax rates. According to a GSMA report, the taxes and fees levied on the local telecom sector are more than double the Asia-Pacific average.
The recent fiscal policy changes for 2024-25, which include an increase in supplementary duty on mobile services and Value Added Tax (VAT) on SIM cards, are likely to have adverse effects on both consumers and the telecommunications industry. The supplementary duty has been raised from 15 percent to 20 percent, and the VAT on SIM cards has increased from Tk 200 to Tk 300. Consequently, consumers will now have to pay Tk 139 to access mobile services worth Tk 100, making it one of the highest cost ratios globally. Historically, high prices have led consumers to reduce their mobile phone usage, negatively impacting government revenue collection. Moreover, the increased VAT is likely to deter the growth of new mobile subscribers.
Furthermore, corporate tax rate of 45% for non-listed and listed companies, compared to 22% in India, create an unstable business environment, discouraging foreign direct investment (FDI).
Predictable tax obligations are essential for encouraging long-term investments. Stability in tax policies assures investors that the business landscape will remain conducive to growth, fostering increased investment in the telecom sector. Thus, a predictable tax regime is crucial for fostering investor confidence.
Additionally, harmonizing tax policies with global standards makes Bangladesh more attractive to international investors. Simplifying tax structures can position Bangladesh competitively in the global market, drawing more FDI into the telecom sector.
High and unpredictable taxes strain the financial performance of telecom companies. By implementing a stable tax regime, the government can attract more foreign investment. This will not only enhance the industry's growth prospects but also ensure that the benefits of technological advancements reach the broader economy.
With stable tax policies, telecom companies can focus on expanding their networks and services, driving further digital inclusion and economic growth. For instance, stable taxation would enable operators to invest more confidently in 4G infrastructure, enhancing connectivity and supporting the Smart Bangladesh Vision 2041. By focusing on the expan- sion and improvement of telecommunications infrastructure, Bangladesh can create a more inclusive and prosperous future for its citizens. Many Asian countries have successfully attracted FDI by maintaining stable and predictable tax environments, significantly enhancing the growth of their telecom sectors.
Revising the tax structure to create a win-win environment for both operators and the government, reducing spectrum costs, and ensuring a predictable tax regime will boost investor confidence and encourage investment, creating a much better investment-friendly environment to contribute to industry growth and development. From connecting the unconnected and enabling technological innovation to bridging the digital divide and unlocking economic potential, the telecommunication industry's impact is significant.
