Allowing ICT sector to thrive

The indispensability of the Information and Communications Technology (ICT) sector in a modern economy cannot be overemphasised. So, it is only expected of the government that the ICT should get the importance it deserves at the time of budget making. But considering what the leaders of the ICT sector told the press in reaction to the proposed budget for the upcoming financial year (FY2023-24), it appears, the sector did not get the attention from the policymakers that was due to it. In particular, the sector leaders were critical of the sudden leap in the rate of the proposed duty on the import of different kinds of software including operating systems, database, security software and development tools. As these are basically raw materials for developing software locally, a 500 per cent raise in the duty, from 5.0 per cent to 25 per cent, would be anything but ICT-friendly, let alone, in sync with the government's vision of creating a Smart Bangladesh, they argued. The same can be said about the 5.0 per cent Value-Added Tax (VAT) imposed on software and the IT-enabled services (IES).

The policymakers including the chief tax regulator, the National Board of revenue (NBR), it is hoped, would be able to appreciate the points raised by ICT-sector leaders, in connection with the new fiscal measures proposed in the budget for FY24. In fact, at the formulation phase of the proposed budget, the ICT-industry representatives placed a set of proposals before the government aimed at ensuring sustenance and growth of the sector. Among those were, for instance, continuing exemption of the corporate tax on the industry until 2030, withdrawing VAT on software and IES, doubling the existing cash incentive against exports of software and IT-related service from 10 per cent to 20 per cent and, alongside export, encouraging domestic use of the locally-developed software.

Though the country's ICT industry evinces huge potential and meanwhile software export from Bangladesh has surged by posting a 36 per cent increase in the first half of the current financial year, it is yet to be a fully grown industry.  The jump in export, despite the prevailing global economic crisis, was driven mainly by the sale of computer data-processing and hosting services to international buyers. Business process outsourcing (BOP) and IES were the driver of the sector's enhanced export potential. But to get further outsourcing work orders for, for example,  back-office operations, data entry, graphic design, image processing, animation, accounting, data analytics including  legal process and so on, the local ICT industry would require the basic software and tools from the high-tech companies of advanced nations. Those basic software products have to be imported because Bangladesh stays behind the West in  research and development of those digital products.

But if the import of those essential digital products is made highly expensive through imposition of excessive duty, the local entrepreneurs providing BOP and IES services to their overseas customers will be rendered uncompetitive. If they fail to sustain in the business, the huge employment generation that the ICT sector has experienced recently will lose the tempo. Similarly, the service provided by the Internet Service Providers (ISPs) needs to be cheaper not only for the growth of IT business, but also for every sector of society that needs internet service. Hopefully, the government at its highest level would look into the issues raised by ICT industry leaders and address those through making required provisions in the budget for FY24.