The size of local e-commerce market is likely to grow by $4 billion in four years and projected to reach at $10.5 billion value in 2026 which was $6.6 billion at the end of 2022, according to the Centre for Policy Dialogue (CPD).
A reform is essential in the revenue administration to increase tax collection from digital economy. At the same time, there has to be rationality in giving tax benefits, the private research organisation said.
The CPD revealed the data at a dialogue on "Taxing the Digital Economy: Trade-Offs and Opportunities” jointly organised by CPD and European Union at Bangabandhu International Conference Center in the capital's Agargaon area on Saturday.
Speakers at the event emphasised both expansion of digital company as well as tax collection from the sector.
They also said tax collection is yet to reach the target despite expansion of digital economy, and easing of tax payment method will bring good result, but harassment must stop in addition to taking initiative to collect tax from foreign companies such as Facebook, Google and Amazon.
CPD distinguished fellow Mustafizur Rahman revealed the data at the event while presenting a keynote paper on the digital economy in Bangladesh. CPD executive director Fahmida Khatun chaired the event.
Mustafizur Rahman gave several examples on expansion of digital economy and unrealised taxes.
He said, “In recent past years, non-resident tech giants (Facebook, Google, Amazon, etc.) are expanding their reach in Bangladesh and this trend is expected to continue in future. Bangladesh is one of the top three countries where people are most active on Facebook. India and Philippines hold the first and second positions respectively.”
Till now, nine non-resident companies including Facebook, Google and Amazon paid Tk 577.2 million as VAT in 2021-22 fiscal year while the total revenue of Tk 3.85 billion was received by National Board of Revenue in 2021-22 fiscal, he added.
The keynote paper mentioned digital ad spaces, according to sector insiders and the Association of Television Channel Owners (ATCO), receive commercial ad worth at least Tk 20 billion from Bangladesh through Facebook, Google, Amazon, and other internet-based firms every year.
As reported by BTRC in June 2019, five mobile phone operators of Bangladesh paid internet-based firms including Google and Facebook Tk 87.50 billion in advertisement over five years, but NBR mentioned the amount was about Tk 1.33 billion only.
In Bangladesh, revenue from OTT (over-the-top) video streaming platforms is projected to reach $152.7 million in 2023 and the number of users is projected to reach 11.3 million by 2027. Netflix has around 200,000 subscribers in Bangladesh with earnings of about Tk 2 billion as subscription. Besides, there is a rise in local OTT platforms like Chorki, Bioscope and Toffee. Bangladesh ranks eight among the top 10 countries for freelancing income with a growth rate of 27 per cent.
At present, the government provides various tax holidays and cash assistance and other incentives in the ICT sector. The tax exemption benefit in IT sector, however, is set to be lifted in June this year, yet a VAT of 15 per cent remains on the sale of products on digital platform.
What speakers said
Addressing the event, lawmaker Kazi Nabil Ahmed said companies like Facebook and Google have a "shadow" in the country, but they don’t have any structure here; these companies must have office in the country. On top of that, the administration needs to be made more competent to raise tax collection from digital economy.
Lawmaker Ahsan Adelur Rahman said a political will is a must for any reform. The coronavirus pandemic worked as a boon for the digital economy with the sector witnessing a 50 per cent growth. But sources of income generation could not be known many a time in digital economy, creating difficulties in tax collection, he added.
The National Board of Revenue is reluctant to carry out reform on raising tax collection and the non-resident companies should open office in Bangladesh, vice-president of Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) Mostafa Azad Chowdhury observed.
Bangladesh Association of Software and Information Services (BASIS) director Habibullah Neyamul Karim said digital company would control entire economy in future, and tax exemption should be there in the IT sector till 2030 so that foreign companies like Daraz cannot take the advantage of digital economy.
“I myself have to go to the NBR and prove whether I paid the taxes or not. The NBR officials should face legal action if they cannot keep tax payers' documents,” he added.
There would be more entrepreneurs in IT sector once a hassle-free tax system can be built, e-Commerce Association of Bangladesh (e-CAB) vice president Mohammad Sahab Uddin observed.
Bangladesh Freelancer Development Society chairman Tanjiba Rahman said when a freelancer earns Tk 100 he/she receives only Tk 30 after paying taxes and other fees.
Former chairman of NBR, Mohamamd Abdul Mojid said why tax-GDP ratio has not increased in so many years should be known. It becomes easier to solve when a problem is found out, he added.
‘Surrender’ to sovereignty of policies
Terming the loan programme of International Monetary Fund a ‘surrender’ to sovereignty of policies, CPD distinguished fellow Debapriya Bhattacharya said, “We have at least surrendered in several fields of the sovereignty of policies and we have taken the money following their terms.”
He said, “There are similarities between today's discussion and at least three conditions of IMF. The first one is to increase tax-GDP ratio, in which the country will have to collect an additional amount of tax revenue than the regular figure at a rate of at least 0.5 per cent of its GDP and the second one is to rationalise tax-exemption. These two issues can be implemented through order, but the third one – to increase administrative capacity in tax collection – cannot be implemented through order. Lots of efforts will be needed to fulfil this condition.”
“These issues were supposed to be implemented in the past, but we could not do so. Economists, businesspersons and professionals are working to make this happen, but it will have to implement now, and that is the reality,” Debapriya Bhattacharya said.