Bangladesh’s Mobile Tax Burden Threatens to Slow Its Digital Leap 

Bangladesh’s ambition to build a digital economy is running into a stubborn obstacle: the mobile phone, the country’s most powerful gateway to digital life, remains heavily taxed at almost every stage�"from network usage and corporate operations to SIM cards and handsets.

A new independent economic study by Frontier Economics has put the issue sharply into focus, warning that high sector-specific taxes on mobile services in Bangladesh and Pakistan are suppressing connectivity, investment and wider economic gains.

Commissioned by VEON Ltd., the Nasdaq-listed global digital operator, the report, titled “Unlocking Digital Growth by Reducing Sector Taxation in Bangladesh and Pakistan”, estimates that sector-specific taxes account for 47% of mobile service revenues in Bangladesh, compared with 37% in Pakistan.

The study argues that substantially reducing this burden could do more than make mobile services cheaper. It could accelerate digital adoption, raise productivity, expand financial inclusion and ultimately generate “higher government revenues through broader economic growth”.

The findings are particularly significant for Bangladesh, where mobile connectivity has become the principal gateway to internet access, digital payments, mobile financial services, e-commerce and formal economic participation for millions of people.

Frontier Economics estimates that cutting combined sales and turnover taxes on mobile services from 47% to 23% in Bangladesh could lift annual real GDP-per-capita growth from about 6.6% to 7.2% in the medium term. In Pakistan, reducing the corresponding burden from 37% to 17% could raise GDP-per-capita growth from 4.2% to 4.5%.

At present, consumers in Bangladesh face a combined tax rate of 39% on mobile services (talk time and internet data), alongside structural changes introduced for SIM cards and device manufacturing. For mobile operators, the turnover tax has been set at 1.5%.

The modelling also challenges the conventional assumption that lower mobile-sector taxation necessarily means permanently lower tax receipts. According to the report, the initial loss of mobile-sector tax revenue would be offset by wider economic expansion, with government tax revenues projected to rise above the baseline by 2030 in Bangladesh and 2031 in Pakistan.

Frontier Economics also estimates that “a 1% increase in mobile penetration is associated with a 0.115 percentage-point increase in GDP-per-capita growth”, underlining the growing importance of connectivity as an economic input rather than simply a consumer service.

“Mobile connectivity is the foundation of digital access and economic development in frontier markets like Bangladesh and Pakistan,” said Clive Kenny, Senior Principal at Frontier Economics. He said the research showed that reducing excessive sector-specific mobile taxes could unlock economic benefits, expand government revenues over the medium term and support the digital transformation objectives of both countries.

VEON Group CEO Kaan Terzioglu said mobile connectivity in markets such as Bangladesh and Pakistan was “not a premium service” but a primary route to economic participation.

The economic argument comes at a critical moment for Bangladesh, where the government has already begun restructuring several taxes affecting the mobile and digital ecosystem.

A Tax Burden Still Weighing Heavily On Users
Current operator tariffs show that mobile users continue to pay 20% supplementary duty, 15% VAT inclusive of SD and a 1% surcharge on applicable services. In practical terms, these taxes add roughly 39% to a Tk100 pre-tax service charge, taking the customer bill to about Tk139.

At the industry level, the Finance Minister himself said during the FY2026-27 budget presentation that the effective tax burden on the telecommunications sector was around 50%, considerably higher than the roughly 25% burden in the broader information-technology sector.

Industry body AMTOB has put the burden even higher, saying operators face taxes, VAT and other charges equivalent to nearly 56% of gross revenue. That is an industry estimate rather than an official government tax statistic, but it illustrates the pressure operators say they face.

The government has nevertheless taken several steps to reduce the burden on the sector.
The FY2026-27 budget abolished the Tk300 tax on each mobile SIM card, replacing it with 15% VAT on the supply price of SIMs and e-SIMs. The measure was designed to make mobile access cheaper and more affordable.

At the operator level, the budget reduced withholding tax on mobile network services from 12% to 10% and completely withdrew the previous 20% withholding tax on revenue-sharing, licence fees and other charges received by BTRC.

Corporate taxation, however, remains significant. NBR’s current tax information lists a 40% corporate tax rate for publicly traded mobile phone operators meeting specified conditions and 45% for non-publicly traded mobile phone companies.

This creates a striking contrast: the government is beginning to rationalise selected taxes while the underlying structure remains one of the heaviest burdens on a sector that is increasingly functioning as basic economic infrastructure.

The Smartphone Tax Shock Returns
The tax story does not end with mobile services.
Bangladesh briefly introduced a major reduction in handset import duties in January 2026, cutting customs duty on imported mobile phones from 25% to 10%. The move reduced the overall tax incidence on imported handsets from 61.80% to 43.43%, while the duty on components used by local assemblers was reduced from 10% to 5%.
But that relief was temporary.

The concession expired on 30 June 2026, and from 1 July the effective tax incidence on imported smartphones returned to around 64.25%, according to reporting based on the NBR tariff structure. Bangladesh Customs’ current duty calculator also lists a 64.25% total tax incidence for smartphones under HS Code 85171300.

That reversal has created a new fault line in the handset market. Officially imported smartphones have again become substantially more expensive, while locally assembled devices benefit from a more favourable duty structure and continued policy support.

The government has extended conditional VAT exemptions for local mobile-phone manufacturing and reduced advance income tax on 22 raw materials used by domestic handset manufacturers to 1%.

The tax changes are also closely linked to Bangladesh’s effort to formalise the handset market through the National Equipment Identity Register, or NEIR, which is designed to identify unauthorised, cloned and illegally imported devices.

A Digital-Growth Dividend?
The Frontier Economics study offers Bangladesh a potentially important policy lesson.
The question is no longer simply how much revenue the state can collect from every mobile call, data package, SIM or handset. The larger question is how much economic activity may be lost when connectivity becomes unnecessarily expensive.

Mobile financial services have already transformed access to banking and payments in Bangladesh. For small traders, migrant families, freelancers, farmers and millions outside the traditional banking system, the mobile phone is increasingly a financial terminal, marketplace, communication platform and gateway to formal economic activity.

VEON, which operates across five countries with more than 150 million connectivity customers and over 228 million digital users, argues that lower barriers to mobile access can generate a much broader economic dividend.

The Frontier analysis points in the same direction: a larger digital economy can create a larger tax base.
For Bangladesh, therefore, the emerging policy debate is moving beyond “tax mobile users or reduce taxes”. It is becoming a more fundamental question of economic strategy: should the mobile sector primarily be treated as a convenient source of fiscal revenue�"or as critical infrastructure for the country’s next phase of growth?

The answer could determine whether Bangladesh merely connects more people�"or turns connectivity into a powerful engine of productivity, financial inclusion, investment and sustainable economic growth.