Mobile Industry Uniquely Positioned to Realise Bangladesh’s Vision 2021 Goals;
Tax Reform Could Enable Fiscal Gains of Nearly $825 Million over Five-Year Period
Hong Kong: The GSMA today released a new report outlining the rapid growth of the Bangladesh mobile industry over the last decade, which now places it as the fifth largest mobile market in Asia Pacific. The GSMA Intelligence country overview also highlights some of the obstacles that may hinder the government’s efforts to achieving its Vision 2021 goals, including affordability of mobile services, taxation and spectrum pricing. Complementing this study, the GSMA also released the findings of a report it commissioned from EY on the potential economic impact of tax reform on the Bangladesh mobile industry.
“It’s clear that the mobile industry plays a crucial role in supporting the achievement of the government’s Vision 2021 and Digital Bangladesh initiatives, as well as the UN Sustainable Development Goals (SDGs). Mobile technology has and will continue to have a positive impact on the people of Bangladesh, and can accelerate Bangladesh’s progress as a digital society,” said Alasdair Grant, Head of Asia Pacific for the GSMA. “The country still faces a significant digital divide however, and steps must be taken to enable the right conditions for mobile internet connectivity to flourish in Bangladesh.”
With 85 million unique mobile subscribers as of the end of 2017, more than half the country’s citizens now have access to essential services. However, despite 3G networks covering 93 per cent of the Bangladeshi population, mobile internet uptake is still low, at 21 per cent in 2017. Prioritising efforts to overcome barriers to adoption, such as network quality, availability of spectrum at affordable prices, taxation, affordability of services, lack of usability and skills, and locally relevant content, will be key to closing the digital access gap.
The GSMA country overview outlined several key findings, including:
Affordability can be major barrier to mobile uptake
- A higher cost of mobile access will more greatly impact the poorest consumers, as it represents a higher share of their monthly income.
- High levels of taxation and fees would directly raise the retail prices faced by consumers, and thus represent a significant barrier to digital inclusion.
A forward-looking regulatory environment is essential
- Through review, reform and modernisation of regulation in key areas, policymakers and the regulator in Bangladesh can play a major role in expanding access to and adoption of mobile broadband.
- A predictable roadmap should be created for future assignments of spectrum (e.g. 700 MHz), in consultation with industry players to ensure fair and reasonable policies and regulations while also supporting effective pricing of spectrum.
- Reforming mobile sector-specific taxation towards a more balanced and efficient structure can increase affordability of mobile products and services by lowering the tax burden on consumers and mobile operators
Spectrum barriers reduce operators’ ability to invest
- The February 2018 spectrum auction saw high auction reserve prices and associated licence fees, which resulted in some spectrum going unsold. This highlights the importance of setting reserve prices for future spectrum auctions that consider operators’ ability to not only finance access to spectrum, but also to deploy infrastructure accordingly.
- The government should ensure the timely release of spectrum and fair prices for access to that spectrum to facilitate better quality and more affordable services
Impact of Reforming Mobile Sector Taxation
The GSMA also commissioned EY to study the economic impact of potential tax reforms on the Bangladesh mobile sector. The report, “Reforming mobile sector taxation in Bangladesh,” analyses developments in the mobile sector and its tax treatment in Bangladesh, and estimates the impacts of potential options for tax policy reform on the mobile sector, the wider economy and the government’s fiscal position. The positive fiscal gains over a five-year period would be:
- $29 million from the reduction of the corporation tax for non-public mobile companies from 45 per cent to 40 per cent and for public mobile operators from 40 per cent to 35 per cent
- $397 million from the elimination of the supplementary duty of 35 per cent and VAT of 15 per cent on SIM cards.
- $397 million from the elimination of the supplementary duty of 5 per cent levied on mobile services.
Based on these proposed tax reforms, the Bangladeshi government may face an initial cost in the first year following the reform, but ultimately, the reforms would be more than self-financing. They would also likely boost productivity, leading to higher GDP and taxation revenue in the medium term. By promoting investment, reducing the cost of mobile ownership and incentivising usage, the tax reforms will help to connect individuals, particularly those in low-income groups, to mobile services.
“While challenges are certainly present, there is an opportunity for the government and the mobile industry to work together to unlock digital transformation for millions of Bangladeshi,” added Grant.
To download the GSMA Intelligence Country Overview on Bangladesh, please visit:
To download the report ‘Reforming mobile sector taxation in Bangladesh’ please visit:
About the GSMA
The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors. The GSMA also produces industry-leading events such as Mobile World Congress, Mobile World Congress Shanghai, Mobile World Congress Americas and the Mobile 360 Series of conferences.
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