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Regional lessons brought to bear on Bangladesh plan to impose more taxes on mobile

The Government of Bangladesh announced its intention to impose more taxes on mobile bills last week. My op-ed in the Daily Star drew on economic principles and regional experience.

There is no debate about the government requiring money. A dynamic sector such as telecom must make its fair contribution.

Collection leakages in telecom are much less than in other sectors because it is a modern sector with automated billing and collection mechanisms. Its systems are also conducive to various calibrations of rates and such. Therefore, it is tempting to turn to telecom as the first source when looking for money.

But economic principles have not been abolished. Charging more tax on a good or service reduces its consumption. In some cases, the government wants to reduce consumption of certain goods and services.

Imposing additional taxes on demerit or bad goods is done with the purpose of reducing consumption. As the government imposes additional layers of taxes on mobile use, it has a duty to make clear how it perceives mobile use. Is it a demerit good like cigarettes?

Or is it a merit good as research appears to suggest, one that will contribute to economic growth and improve the lives of its users?

And finally, it should look at the available evidence of the effects of mobile taxes. Obviously, those who pay the taxes are hurt by higher taxes. The question is will the government be hurt too?

2 Comments to Regional lessons brought to bear on Bangladesh plan to impose more taxes on mobile

  1. Abu Saeed Khan's Gravatar Abu Saeed Khan
    June 13, 2012 at 1:40 pm | Permalink

    The mobile industry of Bangladesh is jogging, not walking, in the minefield of regulations. The Finance Minister has assured of revisiting the proposed tax. Yet the National Board of Revenue reserves the right to impose any tax anytime through Statutory Regulatory Ordinance (SRO) bypassing the parliament. Anytime.

  2. Abu Saeed Khan's Gravatar Abu Saeed Khan
    June 14, 2012 at 7:04 am | Permalink

    The finance minister of Bangladesh said, “I didn’t expect so much reaction,” about imposing tax on mobile phone bill in the proposed budget for the next fiscal year. “We are considering a threshold, crossing which a user will have to pay tax. It is now under processing.” Here is the news.

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