OP-ED: Bangladesh needs an effective e-commerce policy
Attention has been drawn to the fact that various internet based platforms are earning but not paying their taxes at the Bangladesh chess board
Global online platforms have not yet obtained approval to operate in Bangladesh, but a few are available and offer their services to consumers in Bangladesh.
Local online shops use different internet platforms against payment.
Attention has been drawn to the fact that various internet based platforms earn but do not pay their taxes to the Bangladesh Public Treasury.
In early November 2020, the High Court ordered authorities to collect revenue, including withholding taxes and other taxes on all kinds of transactions for advertising, domain sales, licenses and other fees, from Internet platforms such as Google, Yahoo, Facebook, YouTube and Amazon.
The court asked the National Revenue Council (NBR), the Bank of Bangladesh, the Bangladesh Telecommunications Regulatory Commission and other agencies to collect the income payable in the past also from technology companies.
At the same time, US e-commerce giant Amazon and retail heavyweight Walmart are exploring possibilities to strengthen their presence in Bangladesh.
Currently, Google is present in 40 countries around the world, having established 70 offices, while Amazon has offices in 17 countries.
Walmart already has a very large office in Dhaka to source RMGs and plans to set up a point of sale while Amazon is in talks with the government to go into e-commerce.
Chinese e-commerce giant Alibaba already has a presence in Bangladesh through a regional e-commerce company, Daraz.
After evaluating the law and rule of Bangladesh, Walmart and Amazon find that the complex methods of registering and paying VAT are deterrent.
E-VAT registration is unfavorable for Amazon as a permanent local address is a mandatory requirement and they do not have a local office.
They want the NBR to review all regulations / directives as well as documents prepared for the payment of VAT for these two companies.
These two companies do not want to pay taxes through the existing procedures.
They prefer to make payments through any world bank, preferably by electronic funds transfer.
They preferably want an intermediary international professional firm, one of the 4 largest accounting and auditing firms PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG with a strong presence in Bangladesh to resolve VAT issues in their name.
Another major problem encountered is the risk of double taxation.
When a buyer / customer in Bangladesh uses a credit card to make a purchase from Amazon or other similar suppliers, the bank to which the card belongs will automatically deduct VAT from the transaction.
These two companies are not even informed of the deduction for adjustment of such early deductions resulting in double taxation.
Google and Amazon both want this type of automatic VAT deduction to end.
Instead, they want to make VAT payments through a bank intermediary in Bangladesh, facilitated by one of the big four globally reputable accounting firms.
Both companies are seriously monitoring the government’s reaction to their proposals.
These accounting firms have already contacted the NBR to learn about the VAT structure and regulatory affairs in Bangladesh.
This is a test case of the mindset of policymakers and the bureaucratic system in Bangladesh.
Google and Amazon are currently investigating issues such as how much tax they might have to pay and the regulatory framework they will need to follow if they set up offices here.
According to the new VAT law, it is mandatory to use a sales data controller if a company’s turnover exceeds Tk 5 crore.
It will also need to display purchase accounts when submitting returns.
But tech giants face complications around both of these issues as they use their own global platforms for accounts and don’t make any purchases in Bangladesh.
An official at the consulting firm told a local daily that international tech companies have two probabilities: one is to do business by deploying agents and completing the registration process, and the other is to set up offices. premises to obtain more permanent business prospects. .
The government can encourage FDI in single-brand retailing automatically.
It can also allow multi-brand retailing, but only with government approval and certain restrictions.
Based on the experience of other countries, the rules should provide that 50% of the total FDI money is invested only in core infrastructure.
There are clauses for the compulsory local procurement of goods and services.
The rules are relatively easier on the e-commerce front for the pure market model.
Pure marketplace e-commerce company can only provide a platform for third party buyers and sellers to come together and exchange goods.
He cannot buy, keep an inventory and sell the goods.
Basically, this means that an entity with FDI or a foreign company cannot e-commerce under the inventory-based model.
An entity operating an e-commerce marketplace does not have inventory control.
An e-commerce company can try to control the market through sister companies.
They can control a supplier if more than 25% of those suppliers’ sales are made to the e-commerce entity or its sister companies.
The definition of a sister company is a company within an e-commerce company that owns at least 25% of the voting shares.
The policy should prevent e-commerce entities from requiring merchants to sell products exclusively on their platform.
Some e-commerce companies themselves decide to pass the order on to some of their own “front” companies in order to maximize their profits and control the market.
Last but not least, e-commerce businesses should not allow direct or indirect influence on the price of products sold on their website.
They should be allowed to use the massive online discount tactic, which can give offline retailers a hard time.
Amazon generally offers the Amazon FBA (Fulfillment by Amazon) service.
FBA basically provides sellers with an international platform to sell their products around the world.
When a customer purchases a product, Amazon packages it and ships it to customers.
They also take on the after-sales responsibilities.
It has been reported that Amazon plans to stock Bangladeshi products in its warehouse as well and give new entrepreneurs a business opportunity.
There are many manufacturers and garment industries in Bangladesh who are successful in the local market but are unable to ship their products globally.
Amazon will give them the opportunity to list their products on their site.
When a buyer from any country in the world purchases their product, Amazon will ship their products to the manufacturer’s buyer.
In this way, Bangladeshi dealers or manufacturers will benefit greatly.
First, they can sell the products to all over the world.
Second, they sell them even though they don’t personally manufacture the products.
And thirdly, Amazon will handle returns and refunds, so there is no additional problem for that.
With small investments, SME entrepreneurs will sell their products using Amazon as an e-commerce platform.
Bangladeshi regulations should define e-commerce based on inventory and market.
The government should change laws and rules to make it easier to do business.
At the same time, the authorities should prevent abnormal discounts, preferential treatment of some sellers and predatory pricing in order to make it easier for local SME entrepreneurs to do business.
The global payment gateway is expected to be overhauled to ease the transition for buyers at home and abroad.
Bangladesh does not yet have an effective e-commerce investment policy, such as a market model and a stock-based model.
Preference should be given to the e-commerce market model.
The author is an economist lawyer and can be contacted at [email protected]