The government is finally going to reduce corporate taxes for mobile financial services (MFS) providers like it has done for other companies, backing out of its earlier decision to hike such taxes for them, according to officials at the finance ministry.
The tax rate will be slashed to 30% from the existing 32.5% for non-listed MFS companies, while the rate will be 22.5% for the listed ones in the fiscal 2021-22, the sources said.
Earlier, in the budget for FY22, the finance minister had proposed increasing corporate taxes on MFS up to 40% from the existing 32.5%, to bring them into the category of banks, insurance companies and other financial organisations that have been paying a 40% tax.
The National Board of Revenue (NBR) on Thursday sent a new proposal to parliament to bring changes in the Finance Bill 2021, in the light of demands from MFS providers for not considering them financial institutions like banks, other than service providers, finance ministry officials said adding that the new changes will be incorporated in the bill by 29 June.
Welcoming the government's move, Khondokar Shakhawat Ali, sociologist and researcher who has been in the MFS sector since its inception, suggests continuing the same rate for at least next three years.
Before hiking corporate taxes for MFS, the government should analyse its costs and benefits, otherwise, it will directly affect poor people who mainly use MFS for small transactions and pay VAT and income tax with each transaction, Shakhawat added.
Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industries, told The Business Standard, "Cutting corporate taxes for MFS is a good decision. In fact, the government should expand the tax net, rather than increasing corporate tax rates."
bKash, the leading MFS provider that holds around 80% of the market share, has been incurring losses for the last two consecutive years. The company registered a loss of Tk62.5 crore and Tk81.4 crore in 2019 and 2020 in a row despite a surge in revenue.
In such a situation, the sector would face a tough business environment if the tax increased," said a high official at bKash, seeking anonymity.
If foreign investment along with customers and transactions continues to grow in the MFS industry, the government's revenue earnings from this industry will automatically grow, the official added.
The official also mentioned that they communicated with their regulators - the Bangladesh Bank and the NBR to consider their situation.
In the last fiscal year, bKash, the country's largest MFS operator, alone contributed Tk638 crore in revenue to the government exchequer.
Wishing to be unnamed, an official of upay, another MFS provider, said as it is a growing industry, the government should provide policy support to them instead of hiking corporate taxes. None of them are in a position to pay taxes.
Tanvir A Mishuk, managing director of Nagad, the second-largest MFS provider, said, "The overall tax structure of MFS is overburdened both from the investor side and the retail level service delivery point of view. And, now at this position, if the corporate tax increases to 40%, it will be a big obstacle to service expansion, which can actually have a negative impact on the overall digitisation process."
"We think it will be difficult to achieve the overall goal of digitalisation if we do not digitise the financial sector. During the ongoing Covid-19 pandemic, customers need to be attracted more to mobile financial services to establish a cashless society – which will play a role in ensuring transparency and accountability in various fields," he added.
On 31 March 2011, Dutch Bangla Bank first introduced a mobile financial service named Rocket to take banking services to the country's huge population.
Later, other banks also started using this modern technology to ease money transactions for rural and marginalised people who cannot easily avail banking services.
As of March, the number of active MFS accounts is 3.46 crore, according to Bangladesh Bank data.
Currently, there are 15 MFS service providers in the country, which have banking services too. At present, around Tk2,000 crore is transacted per day through MFS providers.