Online sellers point the finger at excessive taxation

The entrepreneurs said too much taxation compared to neighboring countries is a major impediment to the country’s thriving e-commerce sector, and urged tax authorities to narrow the tax gap online and offline.

Referring to the price of a shirt, they said that the fabric costs Tk 1,000 offline while the price increases to Tk 1,100 if purchased from online shopping sites through the Tk 100 tax and VAT at different layers.

“On a purchase of 1,000 Tk, a buyer must pay 50 Tk of VAT [value-added tax] on purchases, VAT of Tk 15 on delivery costs and another tax deduction of Tk 30-40 at source [TDS]. But the rates in our neighboring countries are Tk20-30,” AKM Fahim Mashroor, managing director of online shopping site AjkerDeal, told the National Revenue Board at a pre-budget conference on Wednesday.

Attributing the staggering taxes to just 3-4% of online shoppers in Bangladesh, Fahim Mashroor said up to 30% of consumers shop online in neighboring countries.

Under the chairmanship of revenue council chairman Abu Hena Md Rahmatul Muneem, chairman of online entrepreneur platform e-Commerc Association of Bangladesh (e-CAB) Shomi Kaiser called for political support to help thriving the area.

The measures demanded by e-CAB include abolishing VAT on office rent by online businesses and maintaining the tax exemption for information technology and services until 2034.

Shomi Kaiser noted that the pandemic-induced shutdown and economic fallout led to at least 1 lakh new entrepreneurs joining the online market, and 98% of all e-commerce sellers played by the rules.

In a separate session on Wednesday, the Anti-Tobacco Media Alliance (Atma) urged tax authorities to further raise the prices of tobacco products. Anti-tobacco activists have proposed to price 10 sticks of low-end cigarettes at Tk 50 and to raise the prices of all tobacco products by imposing specific taxes.

Atma delegates claimed their proposal would help save more than 445,000 adults and nearly 448,000 young people from premature death. Also, it would earn the tax authorities another 9,200 crore.

But the president of the tax administration estimated that the rise in tobacco prices does not seem to have the desired impact on public health.

Nadia Binte Amin, Chairwoman of Women Entrepreneurship Network for Development Association (WEND), proposed that the Revenue Council raise the non-taxable income limit for women from the existing Tk3 lakh to Tk5 lakh.

Highlighting the issues related to VAT, she said that although annual turnover of Tk 50 lakh is supposed to be eligible for VAT exemption, revenue collectors show up as soon as the shops are open. Likewise, although there is talk of turnover tax on sales of Tk 50 lakh to Tk 3 crore, there is a difference in the application.

The chairman of the association said that VAT registered businesses are fined Tk 10,000 for not submitting monthly returns, while some businesses fail to make a profit of Tk 10,000 per month.

Noting the harassment to gain access to the Covid stimulus, she also explained whether having a Business ID made sense to drive the Facebook-based market.

Naaz Farhana Ahmed, Director of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), highlighted the harassment of women entrepreneurs in paying VAT and taxes.

She offered to formulate policy guidelines for women entrepreneurs.

Ziauddin Chowdhury, country manager of Xiaomi Bangladesh, wanted a ten-year tax holiday for mobile phone makers, saying it would encourage foreign direct investment in the sector.

Akij Motors proposed to the Revenue Council to reduce import duties on electric motorcycles.

Shahid Alam, vice president of the Bangladesh and China Chamber of Commerce and Industry, has proposed reducing the existing surcharge on assets above Tk3 crore from 35% to 5% to curb the flow of money to abroad and encourage local investment.

The India-Bangladesh Chamber of Commerce and Industry highlighted the problems with importing food through Benapole Port and proposed a number of measures.

The Bangladesh Book Publishers and Sellers Association has proposed exemption from withholding tax on book purchases.

“We now have a digital commerce SOP which clarifies online retail and online marketplace as a separate business model and recommend that existing VAT law include online marketplace as well as businesses based on retail under the definition of good online sales. We have also requested a change to the minimum turnover tax to zero as this industry is still in its infancy and significant investment is required to develop the infrastructure for steady growth of this industry,” said Hasinul Quddus, General Affairs Manager of Daraz Bangladesh.