National Budget: Government to Impose 25% Tax on Mobile Phone

by Hamidur on Thursday, June 11, 2009

In pre-budget talks people were expecting government to reduce tax on mobile phone SIM to reignite the already struggling telecom operators. Telcos also urged government to reduce tax as they subsidized the amount to provide SIM for less. As a result, news spread that the government is likely to reduce tax on SIM card from Tk 800 to Tk 500. What a shame, it didn’t happen!! More over Mobile phones will be costlier if Finance minister A M A Muhith's proposal for a 25 percent duty on their value is passed in parliament. He told this while placing the National Budget of 2009-2010.

“I propose to impose 25% customs duty on mobile phone sets on an ad valorem basis instead of existing specific duty of Tk. 300/set applied irrespective of quality and waive all existing VAT, supplementary duty and AIT. This would entail higher duty on high priced sets and lower duty on low priced sets.” he said. That means, you have to pay at least 25% more to buy new models of mobile phone with high configurations like 3G, mega pixel camera & compatible with other facilities. High profile handsets like Blackberry, Nokia N or E series will be out of reach to common people. This may cause a great blow to mobile phone industry.

Already people don’t want to buy handset even with warranty due to their high cost as the same one can be found for less. Thousands of mobile phones cross through the border everyday without paying duty to government. Those illegal handsets are all around the place and anyone can have those without any problem. At the same time, low price Chinese handsets are also available. If this extra Tax is imposed, I don’t think anyone can survive by importing legal handsets.

The finance minister also sought to lift VAT on Internet services in all educational institutions. "I propose to keep this service within the reach of students and also to signify our commitment towards Digital Bangladesh," A M A Muhith said in his budget speech. This can be great news for universities, schools & colleges. But government has to make sure that no one takes benefit of this. Because there is always a chance of ISP associated with those institutions, use their name to escape tax.

Other important announcements related to telecommunication are –

The corporate tax rate for mobile phone operators is reduced to 35% subject to the condition that they are listed in the stock exchange as a publicly traded company and at least 10% share of the company’s paid up capital is transferred (of which Pre Initial Public Offering Placement cannot exceed 5%);

In the proposed ADP estimates 15.7 percent for communication (roads, railway, bridges, waterways, airways and telecommunication)

To implement the dream of building Digital Bangladesh facilities proposed for (i) submitting online returns for income tax, (ii) for easier availability of computers and laptops and (iii) development of software industry.

In order to have secured connectivity with the information super highway there is an initiative to connect Bangladesh with the Second Submarine Cable Network.

Comissioning of digital exchange at Upazilla and growth centers has largely been completed. The remaining ones will be commissioned in the next year. To facilitate internet connectivity across the country, laying of fiber optical line will be completed in the next year. At the same time, an access network will be built covering 23 districts including 6 divisional headquarters.

The teledensity in the country has increased to 32% from 28% in the last year. While the internet user density has increased from 3% to 4%.