VAT on mobile phones will weigh on consumers and employees: experts

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Experts mention that due to the rise in the price of foreign currencies in recent times, the retail prices of mobile phones have already increased by 10-15%.

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VAT on mobile phones

Experts mention that due to the rise in the price of foreign currencies in recent times, the retail prices of mobile phones have already increased by 10-15%.

In the draft budget for the financial year 2022-23, Finance Minister AHM Mustafa Kamal proposed to withdraw the 5% VAT exemption on the commercial stage of mobile phones. Instead, VAT will be imposed at different individual stages of mobile phone activities, from production to retail.

Industry experts fear this will lead to an unprecedented rise in base mobile phone prices. Experts mention that due to the rise in the price of foreign currencies in recent times, the retail prices of mobile phones have already increased by 10-15%. Experts fear that the new taxation of mobile phone companies will push mobile phones beyond the purchasing power of the general public.

Experts also predict that manufacturers will seek to cut labor costs by at least 30-35% amid rising production costs. At the same time, the new VAT will threaten the booming local handset manufacturing market, hampering the growth of the industry as a whole.

Chinese Brand Mobile Phone Manufacturers Alliance of Bangladesh, a coalition of four Chinese mobile phone brands operating in the county: realme, OPPO, VIVO and Xiaomi, sent a written letter to the National Board of Revenue (NBR), urging the body to regulations to rethink the proposed new tax model.

In their letter, the association mentions: “In the mobile sector in Bangladesh, business is done at about 3 to 4 levels down to the consumer level for each brand. In this case, if a 5% VAT is imposed on each level of mobile phone business, the retail price of each mobile phone will increase by about 15-20%.

The association proposed to abolish the 5% VAT at the company level and replace it with an advanced professional VAT at the factory level.

According to the Mobile Phone Industry Owners Association of Bangladesh (MIOB), 14 mobile phone factories have been established in the country over the past decade with massive investment in the industry.

These factories produce 90% of the local demand for smartphones and 80% of the local demand for feature phones, which have a market value of more than Tk 10,000 crore. According to the association, the new taxation will hamper the process of foreign direct investment (FDI) in the country and will be an obstacle to the growth of “digital Bangladesh”.

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