Unsmart budget for Smart Bangladesh

The government’s proposed value added-tax (VAT) and customs duty on software products for fiscal year 2023-24 (FY24) will clearly impede the industry’s growth, said Fahim Mashroor, founder of multiple popular tech start-ups in the country.

The planned duties will also create obstacles in achieving the country’s Smart Bangladesh vision, he said.

Finance Minister AHM Mustafa Kamal in his budget speech on Thursday proposed a 5 per cent VAT for locally produced software and software customisation services for FY24, which was zero till now.

The minister also proposed to increase the import duty from 5 per cent to 25 per cent on imported software.

Kamal said, “Though 5 per cent customs duty exists on a few software products, the majority of the software products attract 25 per cent customs duty. To protect the domestic software industry and to prevent false declaration and duty evasion, I propose to impose 25 per cent customs duty and 15 per cent VAT on the import of software.”

According to Fahim Mashroor, who founded a series of tech start-ups, including bdjobs, AjkerDeal.com, Delivery Tiger and Beshto, the government’s planned move will hinder the growth of the country’s software industry.

Firstly, he said, “The increase of customs duty and VAT for certain types of imported software like database, operating system, word processing or excel and antivirus or security software will be very counter-productive.

“Although it was said to be done to protect the local software industry, the fact is none of these types of software are developed locally.”

In fact, Mashroor continued, “All the local software development companies use these to make application software. What has been demanded by the industry is to increase duty and VAT for ‘imported’ application software (like accounting, banking, sales automation, HR etc.).

“But unfortunately, the duty and VAT for imported software remains the same as before. So, there is no protection as mentioned in the budget speech.”

Secondly, alongside negatively impacting software businesses, all other industries that purchase their basic software like Microsoft office, Excel etc will now need to spend more for strengthening their technology side, said Mashroor.

“Computer hardware is already much more expensive than before; now basic software will be more expensive. Piracy will increase because of this new duty and VAT,” he pointed out.

“I cannot imagine how such farcical decisions can help the country to achieve ‘Smart Bangladesh’ vision.”