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Dhaka Tribune

Budget measures undermine vision of Digital Bangladesh

Sector people have termed the steps running against the government vision of a Digital Bangladesh as they pose a threat to emerging online and IT-based business

Update : 18 Jun 2019, 09:58 PM

The government has two and a half years to attain its vision of Digital Bangladesh by 2021, and by the time it took a number of initiatives and spent a lot to realize its dream of providing services online, moving towards cashless economy and introducing digital payment gateway.

But measures in the proposed budget for fiscal year 2019-20 have raised questions as to if Bangladesh is on the right track or not in its journey to total digitization.

Sector people have termed the steps running against the government vision of a Digital Bangladesh as they pose a threat to emerging online and IT-based business.

Proposals such as surcharge on mobile data use, 7.5% VAT on e-commerce, 5% regulatory duty (RD) on fibre optic cable, computer parts in the proposed budget for the fiscal year 2019-20 contradict the government vision and its target of earning $5 billion from exports in IT sector by 2021. 

“When we are moving to attain government vision 2021-Digital Bangladesh and trying to take the fiber optic service to remote areas as part of infrastructural development, regulatory measures such as these are not good for the sector,” Syed Almas Kabir, president of Bangladesh Association for Software and Information Services (Basis), tells Dhaka Tribune.

“Imposing new tax or increasing tax rate is a premature decision," he observes. 

Since the ICT sector is at its growing stage, the government should think of imposing tax on related issues after 2021, when there will be a stable situation and the infrastructure will be fully ready, says Kabir. 

As per the Finance Bill 2019 on proposed budget for the fiscal year 2019-20, social media and virtual businesses will have to pay 7.5% VAT (value added tax) on sales. 

Talking on the VAT on online shopping, people in the sector fear that it will go costlier and push people towards offline shopping.

“E-commerce is mostly based in urban areas and the entrepreneurs are trying their best to reach the rural area,” Fahim Masroor, managing director of e-commerce company, tells Dhaka Tribune. 

"A rural consumer has to pay Tk100 as delivery charge, while a 7.5% VAT will increase the total cost of goods. Products priced Tk500 will cost Tk537.5 with the VAT," says Fahim.

AS a result, the consumers will return to offline purchase, which will hit the growing e-commerce industry, warns Fahim. 

The government should reconsider the VAT on e-commerce and it should be kept out of VAT purview for the next five years to create an online-based customer base, he adds.

Growing freelancing and outsource business will also feel the pinch of surcharge on data as there is no available broad band connection in the rural area.   

In the proposed budget, the government has proposed to increase surcharge on mobile talk time and data use from 5% to 10% for the next fiscal year. 

“Increasing surcharge on mobile call can be acceptable to some extent but new rate on data will definitely hit the outsourcing business and freelancers especially those living in rural areas,” Syed Almas Kabir, also chief executive officer of MetroNet Bangladesh Limited, says. 

“I provide different types of work to about 300 freelancers, who are mostly students and live in rural area. These freelancers earn $50 to $100 one an average a month,” Milon Biswas, managing director of Orco Ltd, has told Dhaka Tribune. Orco Ltd, located in Bangladesh, develops software.

The rise of surcharge will have adverse impact on their earnings as they do not have broad band internet access, says Milon, noting that Tk500 is a big thing for a student, who earns from Tk4,000 to Tk9,000 a month.

In recent years, Bangladesh turned into a hub for outsourcing destination and a good number of freelancers are working in remote areas where there is no internet connection.

In a recent move, the Bangladesh Telecommunication Regulatory Authority has issued a circular imposing 0.40 charge on balance checking on mobile financial services, which will discourage use of the service.

“Though the new charge on balance inquiry in mobile financial services (MFS) is yet to be implemented and its implementation needs clarification, it will cast shadow on the emerging online payment business,” a high official of an MFS, has told Dhaka Tribune.   

In the sector, the entrepreneurs are making huge investment and such decision will hinder the development of the growing digital payment gateway, he warns. 

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