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ICT industry associations demand tax exemption until 2031

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Information and communication technology (ICT) sector will play the most important role to implement Smart Bangladesh. For the vision of implementing a Smart Bangladesh, enabling growth of the local software and IT services industry, and increasing foreign currency earnings from this promising sector, it is essential to extend the tax exemption period for the IT sector. The leaders of ICT trade organizations said this at a press conference in a budget reaction on at BASIS Auditorium in Dhaka.

Bangladesh Association of Software and Information Services (BASIS), Bangladesh Computer Samity (BCS), Bangladesh Association of Contact Center & Outsourcing (BACCO), Internet Service Provider Association of Bangladesh (ISPAB) and E-Commerce Association of Bangladesh (E-CAB) jointly organized the press conference.

BASIS President Russell T. Ahmed, BCS President Subrata Sarkar, BACCO President Wahid Sharif, ISPAB President Md Imdadul Hoque and E-CAB Senior Vice President Mohammad Shahabuddin were present at the press conference and gave their proposal on behalf of their respective associations.

At present, the annual domestic market size of the software and ITES sector is around $1.5 billion, while exports have reached around $1.9 billion. According to ‘Vision 2041′ implementation of Smart Bangladesh is to achieve government’s target of $5 billion (5 billion) export revenue from the IT sector by 2029, build world-class capacity in the IT industry, ensure foreign currency reserves, encourage the domestic IT sector, and gradually grow the local market. At this time, in order to meet that demand through our own domestic private ICT sector and to protect the highly valuable foreign currency from going out, it is very necessary to keep the domestic private ICT sector competitive until 2031 and to keep the domestic private ICT sector competitive in the face of aggressive marketing and market strategies of the foreign ICT sector. Therefore, to achieve these goals, the ICT sector should be considered on a priority basis in the budget of the government for the fiscal year 2024-2025.

The ongoing corporate tax exemption for the ICT sector will expire in June, 2024. As a result, investors are not interested in any long-term investment. In addition, new job creation in the ICT sector may stagnate and domestic ICT firms’ business costs may increase significantly, causing to lag behind in global competition. Also, there is no option to extend the exemption period from FY 2024-2025 to attract young entrepreneurs and professionals and investors in this ICT business, which is considered as a priority sector and industry declared by the government as a whole.

On March 10, leaders of five IT-related Organizations, including BASIS, sent a proposal to Finance Minister Abul Hassan Mahmood Ali demanding the government extend the tax exemption till June 2031. Top IT-related organizations have written to the finance minister expressing concern that withdrawal of the exemption could lead to a decline in the sector’s growth, investment and exports.

BASIS President Russell T. Ahmed said, “If the IT sector is brought under tax, it will not even be 1 percent of the total revenue income. The IT sector is just starting to take off, as we race ahead. At this time, it is not right to threaten a potential sector only for this small income of the government. As the government wants to transform the country into a smart Bangladesh, continuing tax exemptions in this sector is more important than ever. We are demanding tax exemption on IT sector till at least 2031 and BASIS has spoken to senior government officials as well as formally written letters in this regard. We hope that the government will give due consideration to the demand for tax exemption for the expansion of local ICT sector and earning foreign currency from this promising sector. Tax exemption in this sector means not only that this tax exemption is given to thousands of companies in the IT sector, it will actually be useful for the development of the entire country to implement Smart Bangladesh”

BCS President Subrata Sarkar said, “I think that the corporate tax exemption period of ICT sector should be kept until 2031 for the purpose of building a smart Bangladesh. Foreign investors invest in Bangladesh’s local ICT sector with a long-term view, where the industry has only just started to take off. So I think there is no option to continue this tax exemption.”

ISPAB President Md Imdadul Hoque said,” It is very important to maintain the tax exemption until 2031 for the desired development of ITES sector. Also I am reiterating the demand for subsuming the ISPAB industry into the ITES sector. Moreover, in the current competitive internet service, the import-dependent ISP sector’s equipment and the reality of the upward movement of the dollar, all the ISP companies cannot earn 10% on the revenue by bearing the cost of the internet service. As a result, all ISPs are facing losses due to additional 10% (AIT) tax on internet service bills. We strongly demand the abolition of 10% (AIT) on internet services in the next financial year 2024-2025.”

For the desired development of the ITES sector, it is very important to keep the tax exemption facility until 2031. Besides, I also urge all ISPs to integrate the ISPAB industry into the ITES sector and the fact that the equipment and dollars of the import-dependent ISP sector are increasing in the current competitive internet service. Organizations cannot earn 10% by carrying the cost of internet services. As a result, all ISPs are facing losses due to additional 10% (AIT) tax on internet service bills. In the next financial year 2024-2025, we demand that 10% (AIT) on internet services be abolished or reverted to 4% as before.”

BACCO President Wahid Sharif said that the current prosperity observed within the Information Technology sector owes its success to the provision of tax exemptions. Evidently, the government holds the view that they are not currently receiving revenue from this industry. However, with substantial employment opportunities generated and the burgeoning purchasing power of working professionals, they are making significant contributions to the country’s economy through personal income tax and value-added tax payments. If the tax exemption period is not extended, there will be disruption to overall export earnings and new job creation, while new entrepreneurs will lose interest in investing in the industry. As a result, the industry’s development would stagnate, leading to widespread unemployment among professionals within the sector. Therefore, the cancellation of tax exemption facilities within the IT industry would impede the country’s overall economic growth in the foreseeable future.

E-CAB Senior Vice President Mohammad Shahabuddin said, “Technology sector needs special care and facilities for some more time due to changes in technology and other related conditions. Tax exemption is one of them. Through this the sector will become sustainable and capable. Revoking the exemption now will have a negative impact on this sector. We believe everyone can understand this.”

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