E-commerce in Bangladesh is mostly untaxed

There hasn't been any effective mechanism to trace and collect revenue from the e-commerce sector though there are growing concerns about matters related to potential revenue loss. 

"It is very difficult to bring the industry under tax net as there are many online businesses selling products through social media platforms apart from online marketplaces," said National Board of Revenue (NBR) Chairman Abu Hena Md Rahmatul Muneem on Thursday.

E-commerce is the fastest-growing industry in Bangladesh. It is making progress at a rapid pace. The e-commerce business experienced a significant 166 percent growth last year. Despite this growth of the e-commerce industry, e-commerce in Bangladesh is mostly untaxed. According to industry experts,  the size of the e-commerce market in Bangladesh is about $2.0 billion and it is increasing at a rate of 50 percent every year. However, he said, the revenue authority has been in discussion with the ICT Division and the Ministry of Industries to develop a system to bring all the e-commerce companies under one platform in order to enable more effective prevention of revenue losses.

NBR chief made the remarks at a pre-budget meeting with the e-Commerce Association of Bangladesh (e-CAB) which was held at the NBR headquarters in the city's Segunbagicha. 

The program was presided over by the NBR chairman. Among others, NBR Member (tax policy) Md Alamgir Hossain, e-CAB President Shomi Kaiser, its Vice-President Mohammad Sahab Uddin, Director (International Affairs) Zia Ashraf, and Director (Corporate Affairs) Asif Ahnaf spoke at the meeting. During the discussion, they stressed on implementation of adequate rules and regulations along with the advancement of e-commerce.

NBR chairman mentioned that easy service delivery and digital payment options are the reasons behind the fast growth of the e-commerce industry. He added, "It is good to see a sector developing; but not just us, the whole world is struggling with the taxation of such business."

He also said, "The sector has expanded banking on low operating costs compared to traditional businesses, since it does not need a decorated office, warehouse, manpower, etc."

Speaking at the program, e-CAB leaders urged the government to exempt VAT and tax on digital payment for products purchased from online marketplaces. e-CAB President Shomi Kaiser said at least 40 to 50 percent of the payments in the online marketplaces were done digitally. The VAT exemption will encourage more people to pay online against their purchase, she added. She urged the revenue authority to recognize the e-commerce sector as information technology-enabled services (ITES) so that they could avail tax benefits.

She also informed the meeting that there were around 1,500 companies registered with the e-CAB while the number of companies outside the platform would be twice the size of the registered ones. The association also proposed slashing the 15 percent VAT on product delivery directly done by the seller company, while the rate should be cut to 5.0 percent if the delivery company is a third party.