Taxing IT freelancing or not

The confusion over imposition---or not --- of 10 per cent tax on IT freelancing at source is over now. Freelancers will continue to enjoy the tax exemption as provided by the Income Tax Act in its sixth schedule for the period between July 1, 2020 and June 30, 2024. Under the Act, not only freelancing but 27 types of other digital services have been kept outside of its purview. Anybody can see that the purpose of encouraging the nascent service industry through tax exemption by order of the Income Tax Ordinance 1984 has not been fully served yet. Although Bangladesh is ranked, according to the Oxford Internet Institute---the multidisciplinary research and teaching wing of the University of Oxford, second only to India in terms of the number of online service providers, the sector needs further organisation for realising its full potential.

This is the reason why income from freelancing has been exempted from tax. When the IT service consolidates itself on a strong platform, the government has every right to demand revenue on income from abroad. In fact, some of the freelancers garnering a monthly income in the range of Tk700,000-1,000,000 would not mind paying tax. Instead of a blanket exemption, it could be limited up to a certain tier. This would have made sense considering the overriding need for revenue collection by the cash-strapped government at this crucial juncture. The fact that the IT sector suffers from the slowest internet speed, frequent disruptions and one of the highest data prices in the South Asian region makes it incumbent on the government to address the problem. Those working for the sector would gladly contribute to any effort expended solely to improve the IT infrastructure and its efficiency. Apart from slow internet speed and high data price, the other vital input for IT service is uninterrupted power supply which unfortunately is not guaranteed.

Instead of leaving the sector constrained, there is a need for addition of more fibre-optic submarine cables to enhance their capacity. A large army of freelancers gives a good impression of service-providing human resources but unless they find an enabling environment for keeping their customer-service commitment, they are unlikely to get more work orders. If the collective band of freelancers can earn a reputation for delivering on time, the sector automatically finds itself on course of flourishing. It is because of the uncertainty of receiving work order, one has to be allowed the concession of not paying any tax. Once that uncertainty is no longer there, the logic behind non-payment of tax disappears.

As for the average freelancers, there is a need for up-skilling them. This sector is well poised to flourish if only the human resources in the sector are given the opportunity to advance their knowledge and skill in line with the continually developing international standards. But the infrastructural support has to match the rising demand. The talent is there but the challenge of giving it an organised shape has not been taken in earnest. No wonder, India's IT institutes modelled so comprehensively are producing the world leaders in this sector. Although late, Bangladesh can do the same if it gets the IT education and its scope organised well. It can earn foreign currency at little costs and the government may also have its due share of revenue.