Legal supply of high and medium-end mobile phone handsets may be affected by at least 30% if the government continues the proposed tax hike on the products, said Samsung quoting from a global study.
The handset maker presented the study report to Finance Minister AMA Muhith yesterday who assured of considering the demand of withdrawal of the tax increase.
The proposed budget for FY2014-15 increased value added tax (Vat) to 15% and imposed 5% advance income tax (AIT) on handset imports.
Samsung, one of the top global high-end handset brands, sees it would have a negative impact in terms of 3G Internet penetration if the proposed taxes are not withdrawn.
The company also sought three-year exemption from customs duties on smartphones.
Bangladesh has been with the third generation mobile broadband for state-owned operator Teletalk since October 2012 while for private operators the service was made available only in September last year.
However, AMA Muhith told the Samsung officials that he would talk to the parliamentary standing committee on finance ministry and stakeholders.
“We tried to make him (finance minister) understand the situation. It seems he is going to consider our demands,” Hasan Mehdi, head of mobile phone section of Samsung Electronics in Bangladesh, told the Dhaka Tribune after the meeting with AMA Muhith.
Choon Soo Moon, managing director of Samsung Electronics Bangladesh, along with some of senior executives also attended the meeting.
Local handsets brand Symphony and leaders of Association of Mobile Telecom Operators of Bangladesh (AMTOB) are also scheduled to meet with the finance minister in a day or two regarding the same issue, said finance ministry sources.
On 5 June, finance minister proposed 15% Vat on handsets import increasing from the existing 10%. He also proposed 5% AIT.
If the taxes are implemented, a handset of Tk5,000 will become of Tk7,637, Samsung officials told the finance minister.
The officials also shared a price sensitivity study with the finance minister. The study, run by a leading global research agency Millward Brown, said the demand of smartphones could be hampered by approximately 35%.
“Due to the price hike, the consumers will opt the handset that best meets their affordability. This will result in the value proposition for an individual to the leap downward. The Mid-end consumers will shift to low-end handsets,” said a Samsung statement.
It said the proposed tax structure will also affect the government’s income from the sector by 18%.
Around 20% of nearly 3 crore handsets imported annually the country are smart phones