Bangladesh’s steady embrace of digitization, led by a growing number of tech startups and growing software and IT services exports, took a hit from the imposition of new taxes this year.
Broadband, smartphones, laptops, desktop computers — all these have become increasingly expensive for the National Board of Revenue, directly or indirectly levying huge taxes on digital consumers and entrepreneurs.
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This will slow down the government’s realization of “Smart Bangladesh”.
This year, 15 per cent VAT has been imposed on laptop imports, 10 per cent advance income tax on broadband internet services and 5 per cent VAT on mobile phone sales.
This has compounded the woes of consumers facing pandemic-induced disruptions in supply chains, a soaring US dollar, energy prices and the Russia-Ukraine war.
MD Islam, a private sector employee, said he had planned to buy a laptop six months ago.
“But I couldn’t do that because the price of the laptop was skyrocketing, taking it out of my hands,” he added.
The impact on users of laptops, a widely used tool for freelancing and IT business, is huge.
Even before the budget for this financial year was presented on June 9, laptop prices in Bangladesh had gone up by 10 percent to 15 percent.
This is a result of rising US dollar costs, shipping and disruptions in global microchip supply.
All this means laptops are 50 percent more expensive than a year ago, industry officials said.
One of the two best-selling types of laptop configurations, prices have risen from Tk 32,000 to Tk 35,000 to Tk 50,000 to Tk 55,000 a year ago.
Another now costs Tk 70,000 to 75,000, earlier it was Tk 45,000 to 50,000.
“The perception of affordability of digital devices has completely changed,” said Ahmed Hasan, managing director of Ryans IT, one of the country’s leading retailers of personal computers and laptops.
“The public is slowly becoming more inclined to buy a computer for freelance or e-commerce. But now they are abandoning the plans,” he said.
Hasan said that the same government led by the current Prime Minister had earlier played a major role in popularizing computers by making them 100 percent tax-free.
Currently, the overall government duty on laptop imports is between 31 percent and 32 percent.
Hassan feels that the duties are unfair and undermine the government’s long-term efforts towards computerization.
By the end of 2022, laptop sales in Bangladesh will reach 450,000 units, according to industry experts. The top selling brands are HP, Asus, Dell, Lenovo and Acer.
Local manufacturers, however, enjoy the opportunity to import raw materials for computer accessories by paying only 1 percent import duty from 2017.
A similar rate applies to purchases of raw materials for the manufacture of printers, toners, tabs and notebooks.
The new VAT at the import stage and concessional facility for bringing in raw materials will benefit Walton, the country’s sole manufacturer with 30 per cent value addition capacity, and a handful of assemblers.
However, they do not have the capacity to meet the local demand and business customers prefer to buy laptops with higher configurations which can only be secured through imports.
Laptop manufacturing is complex and globally dominated by five to six companies. According to the Bangladesh Computer Committee, it is very difficult to establish a laptop manufacturing unit that ensures good value addition from technical aspects.
Meanwhile, a 5 percent VAT on mobile sales has pushed up its prices, slowed smartphone penetration and wreaked havoc on the mobile phone manufacturing industry.
The industry has been hit hard by the depreciation of the local currency against the US dollar, a shortage of the American greenback and limits imposed on opening letters of credit (LC) for raw materials amid dwindling foreign currency reserves.
As a result, mobile phone manufacturing and assembling fell 1.25 percent to 21.99 lakh units in October.
Low sales volumes in recent months have forced manufacturers to cut production.
Around 1.56 crore mobile phones were manufactured in the first five months of 2022. 1.23 crore, a 21 per cent drop in the five months since October.
“Sales of all types of phones have declined in the last six months,” MD Asraf Uddin, CEO of Anira International, which makes smartphones and feature phones, told The Daily Star recently.
“Some months have been very disappointing and we’ve only been able to do about a third of our average sales,” he said.
According to industry experts, the price of smartphones has increased by about 25 percent in the last one year.
According to a new population census published in July this year, nearly three crore people in Bangladesh aged 18 and above do not own a mobile phone and 6.5 crore do not use the internet.
As a result, the unaffordability of devices that enable connectivity and digital inclusion remains elusive for many.
Among the population aged five and above, 44.13 per cent or 6.6 crore people do not own a handset and over 69 per cent or 10 crore people do not use the internet, the Population Housing Census 2022 preliminary report said. .
“The government’s tax policies on digital devices are detrimental to digital inclusion,” said bdjobs.com Chief Executive Officer AKM Fahim Mashroor.
“The government’s Digital Bangladesh vision has largely been achieved in the country’s leading cities. Unless the government changes its stance, its new vision of ‘Smart Bangladesh’ will also be city-centric,” he added.