Govt to reduce SIM tax below Tk 500

The government is likely to reduce the tax on SIM (Subscribers’ Identification Module) card to below Tk 500 from existing Tk 800 to help the industry recover from its sluggish growth. It might make the announcement in the upcoming budget, on June 11, against the backdrop of repeated plea of the telecom companies to salvage the sector. The growth rate of mobile phone business dropped to 30 per cent in 2008 from 103 per cent in 2006. It was 62 per cent in 2007.

The government had assured the telecom companies to reduce the tax although it will have to count Tk 5.0 billion in revenue losses.

Currently, the government collects Tk 12 billion as Value Added tax (VAT) from sale of SIM cards.

“The NBR might impose other tax like supplementary duty (SD) on sale of SIM card to offset the revenue losses,” a competent source said.

Growth of tax revenue from cell phone companies dropped by 21 per cent in the first ten months of the current year over the earning during the same period last year, which is the second highest tax paying sector to the national exchequer, he said.

The mobile phone companies have requested the government for waiver of the SIM tax, but the government is unable to do this for the sake of revenue earning, he added.

Mobile phone companies have demanded tax waiver as higher start-up connection cost has affected the growth of the industry.

The government introduced the SIM tax in 2004 at a rate of Tk 1300, but it has gradually reduced the tax to Tk 800 following requests of the mobile phone operators.

The private phone companies were providing subsidy on SIM tax to increase client base, but they have withdrawn the practice during the last three-four months to offset their operational loss.

“It will be wise if the government completely withdraws the SIM tax. Otherwise, its revenue earning will fall with the slow growth of telecom sector,” said former Bangladesh Telegraph and Telephone Board (BTTB) chairman Fazlur Rahman.

SIM tax is a burden for cell phone subscribers, he said adding that it has already reached the saturation point in the urban area, and now people in rural areas are main target of the cell phone operators, he said.

“Grassroots level of people will not be able to afford the additional cost for SIM tax. Growth of this sector will be hampered seriously due to high start-up cost,” he said.

The number of mobile phone subscribers is now 41 million in the country, increasing from around 21.88 million in 2006 and 34 million in 2007.

Source: Financial Express