While most of the focus has been on taxes being levied on vehicles and fuel most people are still unaware of the impending five percent tax on their telecommunication services imposed by the government’s Tax Bill.
Though this is yet to come into effect, telecommunication service providers like Bhutan Telecom and Tashi Cell say the tax will lead to a hike in mobile, landline and internet rates.
The Tax Bill 2014 states, telecom service provider will have to collect applicable sales tax on behalf of the government in accordance with the rules prescribed by the Ministry. Telecom services shall be listed as a taxable service in the Schedule of Sales Tax Rates on Services. All telecom services as notified by the Ministry shall be subject to sales tax rate of 5%.
It further states that it shall come into effect or force on such date as notified by the Ministry and shall apply to sale of taxable telecom services.
Telecommunication services used by the people are either prepaid or postpaid services, be it for mobiles, internet or landline.
Bhutan Telecom General Manager Pushpa Mani Pradhan said, “I don’t think this will have much impact on the customers as a 5% tax is just a Nu 5 deduction if one recharged with Nu 100 and Nu 2.5 deduction for a Nu 50 voucher.”
However, he said it is going to impact customers who use postpaid and internet lease lines.
People take internet lines based on package systems which are availed as per the choice and preferences of customers.
When it comes to implementing the tax in the package system for the internet, he said, “We haven’t worked on it but we need to work on it especially for the post paid users. I think they might have to add a 5% tax on what they have been paying us.” B-mobile has over 10,000 to 12,000 post paid internet users.
As of now, he said they haven’t got any notification or circulars on when the telecom tax is to come into effect.
The General Manager said, “I think the work burden on the service provider has increased with the need to collect taxes from the people and later pay it to the government.”
Meanwhile, Tashi Cell’s Commercial Manager Jigme Thinley said the tax system will be in effect from August 2014. He said, “We expect a drop in the revenue for at least three years.”
But Tashi Cell said they are not ready to implement the taxes by August because it is a system based issue and they are still in the process of sorting out implementation issues.
“We had two rounds of meeting with the government where we have requested for extensions for the implementation of the sales tax on telecommunication services, he said.
“Broadband and landline users are not much of a problem but postpaid and internet lease line users will be affected because such users have to henceforth pay as per the tax provision,” he added.
He said that the tax would also reduce the purchasing power of the consumer.
“Basically if you use more, you will be taxed more,” he said. For example, if a person uses internet worth Nu 10, 000, they will have to pay Nu 500 more as 5% tax.
He said Tashi Cell has more customers from rural area and the tax pain would be be felt by them through higher bills.