Don't impose tax on web hosting, cloud service companies

Trade bodies of the ICT industry in Bangladesh have urged the government to keep web hosting and cloud service companies tax-free to enhance data protection and localisation.

Currently, only 10 percent of the country's cloud service and web hosting market, estimated to be worth $20 million, is held by local entrepreneurs.

So, bringing these service providers under taxation could discourage their development, said Russell T Ahmed, president of the Bangladesh Association of Software and Information Services (BASIS).

The demand comes as the government has proposed three-year tax exemptions for 19 ICT businesses on the grounds that they implement cashless transactions to promote the digital economy.

However, services such as web hosting and cloud services were removed from the exemption list while others were added in some proposed measures of the national budget for fiscal 2024-25.

Against this backdrop, Ahmed emphasised the need to keep web hosting and cloud services providers tax-free to sustain the growth of related local ICT companies.

He also called for the government to reconsider imposing a 1 percent duty on imports of capital equipment for investors of high-tech parks and urged to maintain the current duty-free status.

He was speaking at a post-budget press conference organised by four ICT trade bodies at the BASIS Auditorium in Dhaka yesterday.

The organisations are BASIS, Bangladesh Association of Contact Center and Outsourcing (BACCO), Internet Service Provider Association of Bangladesh (ISPAB) and E-Commerce Association of Bangladesh (E-CAB).

The BASIS president thanked Prime Minister Sheikh Hasina for extending tax exemptions for the ICT sector by three years.

Syeda Ambareen Reza, vice president of E-CAB, said the existing VAT in the logistics sector needs to be withdrawn to expand e-commerce and smart logistics services.

"This tax exemption will not only contribute to the development of the ICT sector, but also play a crucial role in building a Smart Bangladesh, impacting various fields such as education, healthcare, agriculture, banking and export-oriented manufacturing," she added.

BACCO President Wahid Sharif highlighted the tax exemption's positive impact on various export-oriented industries, education, healthcare, and banking, which would lead to job creation and substantial foreign currency earnings, thereby boosting the economy.

He said the proposal to increase supplementary duty on mobile SIM card usage by 5 percent would raise the cost of mobile internet services. He stressed that expanding mobile internet and rural internet services is crucial for achieving Smart Bangladesh.

ISPAB President Md Emdadul Hoque said despite directives from the prime minister, broadband internet services providers have not gotten any tax exemptions.

On top of that, a 10 percent advance income tax on broadband internet service providers and 37 percent VAT on optical network units and optical line terminal equipment pose significant challenges for internet service providers, he added.