Bangladesh to tax the mobile industry (again)

Posted on July 17, 2014  /  0 Comments

It started with the infamous “SIM tax” in 2005. Although mobile covers nearly 100% of population and geography, a highly ambiguous Social Obligation Fund (SOF) was created in 2010. Consequently the telecom regulator has been illegally amassing huge wealth since 2011.

Now the tax authorities have decided to impose 1% surcharge on mobile usage to “promote rural education.” And for the first time, the taxmen will be collecting a sector-specific toll. Gross annual turnover of Bangladesh mobile industry is more than US$2 billion. Therefore, the National Board of Revenue (NBR) will annually amass in excess of $20 million for fictitious purposes.

Bangladesh government has already failed to structure the management of equal amount of money it collects for SOF. Fate of the proposed kitty for “education” is unlikely to be any different. As a result, the telecom regulator and the tax regulator will end up with a huge pile of cash. That is extremely dangerous for fiscal governance in a developing economy.

Last year, the Pakistan government has “borrowed” RS. 50 billion ($500 million) from Universal Service Fund (USF). Theoretically, the Fund “will be able to get the money back from Ministry of Finance when and if it ever requires.” Following the footprint of Pakistan, the military government of Thailand has also decided to “borrow” from the kitty of $620 million USF to meet budgetary shortfall. For the record, the Thai junta has just spent $21.5 million to broadcast FIFA World Cup matches at free of cost.

This how the taxpayers’ idle money drifts from core objective and become susceptible to mindless spending. Bangladesh is just planning to widen the scope of that inevitability. Whereas the telecom operators, notably state-owned outfits, owe more than $336 million to BTRC. Instead of punishing the defaulters, the mobile industry has been targeted for further tax. Pity!

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