The telecom sector in Bangladesh is facing a critical challenge due to an excessive tax burden, which is squeezing the industry and pushing costs onto consumers. This issue is a pressing concern for everyone, especially as it impacts the very foundation of our digital connectivity.
Let's take a closer look at how this situation is unfolding.
The Heavy Tax Burden and Its Impact
For Hasan Mahmud, a 28-year-old ride-sharing driver, the rising costs of mobile internet are a tangible concern. What he might not realize is that a significant portion of his hard-earned money, about Tk55 for every Tk100 spent on mobile services, goes directly to the government in the form of taxes and fees. This burden not only affects his livelihood but also limits the industry's ability to invest in network expansion and service improvements.
Industry experts reveal that Bangladesh's telecom tax burden is significantly higher than that of neighboring countries and the global average. Operators are now diverting investments from core telecom services to other digital ventures, a strategic shift driven by necessity rather than choice.
Taxes and Their Impact on the Industry
Mobile services in Bangladesh are subject to a 20% supplementary duty, a tax typically reserved for products the government aims to discourage, such as tobacco. This places the telecom industry at a disadvantage compared to most other sectors. The corporate tax rate adds to the strain, with listed operators paying 40% and non-listed ones facing a 45% rate.
When all the taxes and fees are tallied, including supplementary duty, VAT, revenue-sharing fees, spectrum charges, and license costs, they consume around 55% of telecom revenue. In comparison, India's overall tax burden on telecom operators is approximately 35%, and Pakistan's is 29%.
A senior industry executive highlights that this burden is not just felt by operators; consumers bear the brunt through higher charges, slower service upgrades, and uneven quality.
Profits and the Struggle for Sustainability
The impact of this tax burden is evident across the sector. Grameenphone stands alone as the only operator generating relatively sustainable profits. Other operators, despite decades of operation, continue to grapple with financial challenges.
With voice revenue stagnating and spectrum costs remaining high, operators are repositioning themselves as digital service providers. Fahim Mashroor, from the civic platform Voice for Reform, emphasizes that the tax regime fails to recognize the essential nature of connectivity in today's world.
"Internet and voice services are basic necessities. Why impose a 20% supplementary duty on them?" he questions. "Supplementary duty is usually for discouraged products, not essential services."
He further points out that Bangladesh's internet penetration lags behind its neighbors, yet telecom taxes are significantly higher.
The Regulator's Perspective and the Need for Relief
Officials from the Bangladesh Telecommunication Regulatory Commission (BTRC) acknowledge the strain on the industry and consumers. They state that tax-reduction proposals are regularly submitted to the National Board of Revenue (NBR) before each budget, but relief has been elusive, with authorities citing Bangladesh's low tax-to-GDP ratio.
Abdun Naser Khan, secretary of the Posts and Telecommunications Division, acknowledges the issue's impact, saying, "This huge tax burden is a double-edged sword, pushing the industry back and causing hardship for consumers."
The High Tax Conundrum
Data from GSMA Intelligence highlights that corporate tax on mobile operators in Bangladesh can reach 45%, a level typically associated with harmful products in many countries. In comparison, India applies a 35% corporate tax, Pakistan 29%, and Sri Lanka 28%. Countries like Vietnam, Thailand, and Cambodia have rates around 20%, while Brunei's corporate tax is a mere 19%.
In addition to corporate tax, customers face a 20% supplementary duty on recharges and VAT. Operators also pay minimum turnover tax, revenue-sharing fees, spectrum charges, license fees, social obligation fund contributions, customs duties, and various local taxes.
Collectively, these taxes and fees absorb about 55% of telecom revenue in Bangladesh, significantly higher than the Asia-Pacific average of 24% and the global average of around 22%. Even Sub-Saharan Africa, with an average of roughly 35%, has a lower tax burden than Bangladesh.
Mohammad Zulfikar, secretary-general of the Association of Mobile Telecom Operators of Bangladesh (AMTOB), emphasizes that this layered tax structure is unsustainable. He calls for an urgent review of supplementary duty, VAT on spectrum, SIM taxes, and minimum turnover tax, highlighting that such burdens are rare internationally.
The Struggle for Survival
The strain on the telecom industry is most evident in the case of Banglalink. Despite 26 years of operation, the operator has yet to post a profitable year. With a 22% market share and roughly 40 million subscribers, Banglalink reported a Tk331 crore loss in the latest fiscal year.
An additional 2% turnover tax, even during loss-making periods, further constrains cash flow. Persistent losses have forced the operator to limit investments in network upgrades, focusing primarily on meeting tax, spectrum, and license obligations.
Robi, Bangladesh's second-largest operator with nearly 70 million subscribers, took 21 years to reach profitability after its launch in 1997. While the company recorded a turnover of Tk9,950 crores last year, profit stood at just 7% of revenue.
Tax pressure continues to limit investment in unified network management, fiber backhaul expansion, and 4G quality enhancement, despite efforts to control costs and grow digital and enterprise services.
The Forced Pivot and Future Challenges
Under mounting pressure, operators are expanding beyond traditional telecom services. Grameenphone is growing its MyGP app, offering a range of digital services, while strengthening enterprise offerings in cloud, IoT, and cybersecurity. Robi is focusing on enterprise solutions, smart metering, fleet management, and smart city projects, along with digital partnerships in education and healthcare.
Banglalink is positioning itself as a digital lifestyle brand, leveraging its MyBL app, fintech partnerships, data analytics services, and its popular OTT platform Toffee.
However, Faheem Mashroor warns that without adequate funding, improvements in 4G quality and the eventual deployment of 5G could face significant delays. He emphasizes that the tax structure is not just hurting operators but the entire digital ecosystem.
AMTOB's Zulfikar highlights the need for a gradual rationalization of taxes and fees in line with international benchmarks, along with a review of spectrum pricing and renewal costs. He believes that without an investment-friendly policy environment, large-scale 5G deployment is an unrealistic expectation.
This complex issue raises important questions about the balance between taxation and the growth of essential digital services. What are your thoughts on this matter? Should there be a reevaluation of the tax structure to support the telecom industry's growth and ensure better service quality for consumers?
