'Such measures shall expand our tax base,' says the minister
Finance Minister AMA Muhith on Thursday suggested taxing the income of digital companies such as Facebook, Google and YouTube in order to increase government revenue and expand the tax base in the next fiscal year.
In his budget speech to parliament on Thursday, the veteran economist said many foreign entities are earning income in Bangladesh through virtual and digital transactions, but the country is not receiving adequate tax from them.
“With the speedy development of internet technology, social media and mobile application platform-based virtual business are booming,” he said.
“Since these virtual and digital business transactions are comparatively new, our tax laws are not sufficiently up-to-date to bring all virtual transactions under the tax net.”
Muhith named Facebook, Google, and YouTube among the companies whose income earned in Bangladesh would be subject to the proposed duty in line with international good practices.
He said that in order to bring these virtual businesses under the tax net, a new service code of “Virtual Business”has been defined, on which 5% VAT shall be levied.
“Such a measure shall expand our tax base,” the finance minister said.
The government move follows a High Court order on April 12 to levy taxes and other duties on the revenue earned in Bangladesh by Google and Yahoo, Facebook, YouTube, Amazon, and all international internet platforms.
The taxes and duties would apply to all types of transactions by the companies, including online advertisements, domain sales and licence fees.
In addition, online shoppers will be hit by a proposed 5% VAT on e-commerce businesses from July 1, although it remains to be seen if the government will be successful in pushing through the plan.
Muhith tried to impose a slightly smaller, 4% rate of VAT on the sector in his budget speech for the fiscal year 2015-16, but this proposal was later withdrawn following strong opposition from stakeholders.