MFS providers to pay more tax from next FY

The government has proposed to increase corporate tax of mobile financial services providers in the proposed budget for 2021-22 fiscal year.

Finance Minister AHM Mustafa Kamal proposed a 5 per cent tax hike for the publicly traded MFS providers and 7.5 per cent for the non-publicly traded providers as he placed a proposed budget of Tk 603,681 crore in parliament on Thursday.

Currently, both publicly and non-publicly traded providers pay a tax of 32.5 per cent.

Minister Kamal proposed to raise the tax to 37.5 per cent for stock exchange listed companies and 40 per cent for non-listed companies in the new FY.

At present, 16 banks have launched MFS. Popular MFS providers include bKash, Nagad, Rocket, UCash and upay.

MFS is playing an important role in bringing mainstream banking services to the doorsteps of the marginalised, the minister said, noting that the current daily transactions through MFS are worth an average of Tk 1,745 crore.

Under an incentive scheme, the cash out charge has been reduced from 1.85 per cent to 0.8 per cent for the payment of workers’ salaries of export-oriented industries.

The personal transaction limit for the purchase of essential food items and medicines through MFS has been increased to Tk 200,000 from Tk 75,000. The cash out charge has been waived up to Tk 1,000 and the transaction charges of the sellers of such products have been waived, the minister pointed out.

Financial inclusion, formalisation of the economy and expansion of tax net are of utmost importance to the national economy, he said.

Kamal proposed, among others, to include MFS as a means of payment along with bank transfer where making payment through bank transfer is a mandatory provision; to make payment through crossed cheque or bank transfer or MFS mandatory where the amount exceeds Tk 50,000; and to make the rate of tax deduction 50 per cent higher than the applicable rate where the bills are not received through banking channel or MFS by suppliers and contractors.

“If these proposals are endorsed, the size of the formal economy of the country will get bigger, and investment and revenue collection will increase significantly,” he told the House.

“By allowing transaction through MFS along with bank transfer, this widely used modern technology has been formally recognised in our tax law. This will ensure a business-friendly environment,” he said.