Broadband, smartphones, laptops and desktops have all become more expensive for the National Board of Revenue, which directly or indirectly taxes digital consumers and entrepreneurs.
This could also potentially slow down the government’s implementation of “Smart Bangladesh”.
This year, a 15% VAT was imposed on the import of laptops, a 10% advance income tax on broadband internet services and a 5% VAT on the sale of mobile phones.
It compounded the woes of consumers already dealing with pandemic-induced disruptions to supply chains, soaring US dollar and energy prices and the Russia-Ukraine war.
Md Islam, a private sector employee, said he had planned to buy a laptop six months ago.
“But I couldn’t do that because the price of the laptop was spiraling up and putting it out of my reach,” he added.
The impact has been huge on laptop users, a device widely used for freelance work and IT business.
Even before the release of the budget for this fiscal year on June 9, laptop prices in Bangladesh have increased by 10 to 15 percent.
This was a result of rising US dollar and shipping costs and disruptions to global microchip supplies.
All of this has made laptops now cost 50 percent more than they did a year ago, industry insiders said.
Of the two top-selling laptop configuration types, one has gone up in price to Tk 50,000 to Tk 55,000 from Tk 32,000 to Tk 35,000 a year earlier.
The other now costs Tk 70,000 to 75,000, while earlier it was Tk 45,000 to 50,000.
“The perception of affordability of digital devices has completely changed,” said Ahmed Hasan, managing director of Ryans IT, one of the country’s leading retailers of PCs and laptops.
“Ordinary people have slowly been more inclined to buy a computer through freelance or f-commerce. But now they are abandoning the plans,” he said.
“The same government, led by the current prime minister, was earlier involved in popularizing the computer by making it 100% tax free,” Hasan said.
Currently, total government tariffs on laptop imports are 31 to 32 percent.
Hasan thinks these tariffs are not justified and undermine the government’s long-term efforts to electrify.
According to industry insiders, laptop sales in Bangladesh are expected to reach 450,000 units by the end of 2022. The best selling brands are HP, Asus, Dell, Lenovo and Acer.
However, since 2017, local manufacturers have been using the opportunity to import raw materials for computer accessories at an import duty of only 1 percent.
A similar rate applies to purchases of raw materials for the production of printers, toners, cards and notebooks.
The new VAT at the import stage and concessional facilities for importing raw materials will benefit Walton, the country’s only manufacturer with 30 percent value-added capacity, and a handful of assemblers.
However, they do not have the capacity to meet the local demand and business consumers want to buy laptops with high configuration which can only be provided by imports.
Laptop manufacturing is complex and dominated by five to six companies worldwide. According to the Bangladesh Computer Samity, it is very difficult to create a laptop manufacturing unit that provides good value addition from technological aspects.
Meanwhile, a 5 percent VAT on the sale of mobile phones has pushed up their prices, slowed smartphone penetration and wreaked havoc on the mobile phone industry.
The industry is facing a tough time due to the depreciation of the local currency against the US dollar, shortage of the US dollar and limits imposed on the opening of letters of credit (LC) for raw materials amid dwindling foreign currency reserves.
As a result, the production and assembly of mobile phones fell 1.25 percent to 21.99 million units in October from the previous month, data from the Bangladesh Telecommunication Regulatory Commission (BTRC) showed.
The lower sales volume in recent months forced the manufacturer to reduce production.
About 1.56 billion mobile phones were manufactured in the first five months of 2022. In the following five months to October, the figure was 1.23 billion, a decrease of 21 percent.
“Sales of all types of phones have declined in the last six months,” Md Asraf Uddin, CEO of Anira International, which makes both smartphones and feature phones, told The Daily Star recently.
“Some months were so depressed that we were only able to achieve one-third of our average sales,” he said.
According to people in the industry, the price of smartphones has shot up by about 25 percent in the last year.
According to a new census released this July, about three million people in Bangladesh aged 18 and over do not own a mobile phone and 6.5 million do not use the internet.
In fact, it highlights the unavailability of devices enabling connectivity and digital inclusion, which are still elusive for many.
Of the population aged five and over, 44.13 percent, or 6.6 million, do not own a phone, while more than 69 percent, or 10 million, do not use the Internet, a preliminary report from the Census of Population, Homes and Dwellings 2022 said. .
“The government’s tax policies on digital devices are detrimental to digital inclusion,” said AKM Fahim Mashroor, CEO of bdjobs.com.
“The government’s vision of Digital Bangladesh has been achieved mainly in the leading cities of the country. Unless the government changes its stance, its new vision of ‘Smart Bangladesh’ will also be city-centric,” he added.