Tax hike to hit mobile banking

Scitech Report

7 June, 2021 12:00 AM printer

The government has proposed a hike in tax on mobile financial services to 40 percent from earlier 32.5, which industry experts say, will hit financial inclusion.

Analysts mentioned that the higher tax on MFS will push up cost of operations and discourage poor people and agents to use this tool. Most operators say the overall tax structure of mobile banking is already overburdened both from the investor side and the retail level service delivery point of view.

Postal Division-backed provider Nagad managing director Tanvir A Mishuk said the increased corporate tax will be a big obstacle to service expansion, which can actually have a negative impact on the overall digitisation process.

"We think it will be difficult to achieve the overall goal of digitalisation if we do not digitise the financial sector. During the ongoing Covid-19 pandemic, customers need to be attracted more to mobile financial services to establish a cashless society – which will play a role in ensuring transparency and accountability in various fields", he said.

MFS is not just a payment tool but a game changer for poor people in Bangladesh. It enables unbanked people to store and transfer money using their cell phones and gives poor people access to basic financial services, ch is necessary to accelerate economic growth, according to the World Bank.

The number of active MFS accounts is 34.6 million, according to Bangladesh Bank data. Currently, there are 15 service providers in the country  which make monthly transactions worth of Tk 200 billion.

Khondokar Shakhawat Ali, a sociologist and researcher, said hiking the corporate tax will not be a good policy decision at this time because it will directly affect poor people who mainly use MFS for small transactions.

The tax hike on MFS has been proposed in a time when industry operators face a hard time in this pandemic day after serving poor people without fees, which forced them to incur huge losses. bKash, the leading MFS provider that holds around 80% of the market share, has been incurring losses for the last two consecutive years.

The company registered a loss of Tk62.5 crore and Tk81.4 crore in 2019 and 2020 in a row despite a surge in revenue. "In such a situation, the sector will face a tough business environment if the tax increases," said a high official at bKash, seeking anonymity.

MFS has multidimensional effects on people's lives. So, it has caused a quantum leap for the alleviation of world's poor. Social scientists in developing countries have now begun to support marshaling this tool to help thwart poverty from their respective society.

MFS has direct impact on the economy of Bangladesh as expatriate workers are now using some official channels offered by some banks that are using MFS like bKash as the last mile delivery channel to send their hard earned remittance to their relatives timely and without hassles.