There are around 2,000 e-commerce sites and 50,000 Facebook-based outlets delivering almost

30,000 products a day. At present, Dhaka, Chattogram and Gazipur account for 80 percent of online
sales. There is no regulatory oversight over most of the products sold via Facebook.

Customers prefer ‘cash-on-delivery’ over online payment which poses the risk of tax evasion and
also causes lack of transparency in the transactions. It is sometimes hard to ensure consumers’
rights in cases of cheating, low quality or expired products as there is no regulatory authority to
discipline the sector.

The government introduced the National Digital Commerce Policy to regulate the sector in
2018 but a regulatory structure for e-commerce is yet to be initiated.

(Bangladesh e-commerce booms beyond

regulatory oversight BD news

Facebook-based business has gained immense popularity in Bangladesh in the past

few years. About 85 per cent of the country’s web users are using the internet through
mobile networks and their smartphones.
 Cashing in on that, many f-commerce businesses flourish, especially the small-scale ones, which
only started with a Facebook page and a modest number of followers. Most of these Facebook-based
businesses sell product like clothing, shoes and handbags, and most of them are owned by women
entrepreneurs.
Former e-commerce Association of Bangladesh (e-Cab) president Razib Ahmed said, “There are
about 10-15,000 f-commerce businesses at present and most of them usually spend at least $5-10
every day boosting their ads.”
Ahmed, too, admits that taxing the tech giants could probably hurt the growing f-commerce business
in Bangladesh as the tech giant might then charge extra money for conducting business with
Facebook pages.(

(Taxing times for online business?)

Current legal scenario: The new VAT law, which took effect on July 1,2019 made it
mandatory for the tech giants to either set up offices in Bangladesh or appoint agents such that
the government can collect value-added tax (VAT) on the advertisements made on their
platforms by local firms. Currently, more than 50,000 Facebook pages are running e-commerce
business and they all have to spend a huge amount for digital ads according to e-CAB.  over
25,000 to 30,000 parcels are delivered daily and the amount rises to 40,000 to 45,000 ahead of
Eid or other occasions.The turnover of the e-commerce market hit Tk 800-1,000 crore
annually.Industry people said major e-commerce organisations spend $8,000 $10,000 a month
for digital marketing which means it goes up to $100,000 a year.The e-cab general secretary said
e-commerce or Facebook-based e-commerce businesses spend at least $5-10 every day to give a
boost to their advertisements.( VAT registered by july 1)

Market insiders said companies like Facebook and Google and its subsidiary YouTube receive
huge amounts of advertisement revenue from Bangladesh annually but the companies are not
registered in the country.As they have no VAT registration in Bangladesh, there are no estimates
of how much money is being siphoned abroad for the purpose of advertisement through these
sites and platforms
 Digital advertisement is progressively accounting for a lion’s share of companies’ advertisement
budget. But the government does not get significant amount of VAT from the ads running on
Facebook, YouTube, Google and other digital platforms.Every year Facebook, YouTube and
Google earn more than a thousand crores of taka from Bangladesh and the majority of the sum is
channeled beyond the banking channel. For example, six banks were used for sending money to
Google and Facebook since 2014 and the value is Tk 205.09 crore and $7.03 million
respectively, according to a central bank report placed with the High Court recently. The
Bangladesh Bank report came following a writ petition filed by a lawyer.As per rules, the NBR
is supposed to get 15 percent in VAT and another 4 percent in advance income tax ( No
response form FB , youtube)

The VAT Audit, Intelligence & Investigation Directorate has filed a case against
Facebook's agent in Bangladesh "HTTPool Bangladesh Ltd" for violating Value
Added Tax and Supplementary Duty act. VAT Intelligence also found that the
organisation didn't file any VAT return since they registered here three months ago.
According to the law, it's mandatory for any organisation to file VAT return every
month. As per the findings, the local Facebook agent already collected advertisement
worth Tk6.22 crore from 31 organisations across the country. Tk93.32 lakh worth
VAT amount was not added to the government treasury as HTTPool did to not file
VAT return on time.( Facebook fined)
Tax collection & identification:

In practice, there are many general aspects that consider challenges for the enforcement of
transactions related to electronic commerce. These include anonymity of identity and location of
parties, anonymity of transactions and accounts, disintermediation, transfer pricing issues, online
delivery and digital cash, easy access to tax havens and low tax jurisdictions, new evasion
opportunities, and recovery of tax exchange of information.
Pro-taxation group: the failure to impose tax on electronic commerce would cause significant
revenue losses for state and local governments, with no tax status for electronic commerce,
businesses will transfer to electronic commerce, allowing tax exemption to electronic commerce
is not fair, although some people believe that electronic commerce should receive preferential
treatment to encourage its development, there is no evidence to support this idea as it may still
grow with taxes imposed.
Anti- taxation group: electronic commerce do not witness the same rapid growth in electronic
commerce, difficulties in collecting taxes on electronic commerce, existing tax laws are
inappropriate for the internet due to its electronic and cross-border issue
Proposals:
The electronic commerce taxation of physically-delivered products might raise some
challenges but it is not difficult to overcome it. Imposing taxes could be at any stage of supply
chain. Therefore, if a state could not tax business transactions that have been done electronically,
it could tax at least at the final stage while it is delivered. If electronic commerce transaction is
on a domestic level, imposing tax could be through delivery such as via shipping companies or
even regular post offices. If electronic commerce transaction is on international level, imposing
taxes could be through delivery or as applying tariffs and duties at the port of shipping or port of
delivery. But there are difficulties of imposing taxes and duties on digitally-delivered products
and conflicts that might arise from doing so. These difficulties are raised from three complicated
issues: the classification of digitally-delivered products; the legal jurisdiction that is involved in
digital methods; and the practical difficulties in collecting taxes and duties on digitally-delivered
products
Upto this from one report

1. The idea that the European e-commerce proposal is promoting is that, after any electronic
transaction between a seller and buyer, banks should withhold the required taxes from the
transaction and pass the proceeds to the appropriate governments. A provision is made in
the proposal for banks to charge service fees for withholding taxes.
 2. The e-card system proposed by the Clinton administration is a variant of the traditional
VAT method of taxation. Customers would purchase digital cash cards or e-cards from
banks and they will therefore determine the country of the buyer. Once the place is
established where the e-card has been purchased, this would be the place of consumption.
VAT can easily be calculated and collected together with the sale of the card. The tax
revenue owing to the relevant government will be distributed by a third-party escrow
agent
3. With the software proposal, software would be created that incorporates all the tax rates
used worldwide on any item that could be sold. The retailers would download the free
software and install it on their website and computing platform. The software would be
very easy to install and it would be a technologically neutral system. Once the program is
installed on the seller’s website, it automatically tracks products sold in order to insure
that the right government will receive the correct amount of taxes. After the customer
pays the amount owing for the product, the correctly calculated tax amount is
automatically transferred to the relevant government’s bank account via electronic
payment. This ensures that the right amount of tax is paid, as well as that the amount will
be paid before the seller has a chance to interfere and possibly keep the money
Upto this from one report

The most feasible proposal is that of tax being withheld at source by financial intermediaries.
This method of taxation entails the financial institutions’ collaboration with different states.
These institutions would have to keep an up-to-date database with the tax rates of each country to
be applied in the different operations

Identification, record keeping & tax collection

These electronic transactions create enormous problems for tax authorities in establishing
audit trails, in verifying parties to transactions, in obtaining documentation, and in fixing
convenient taxing point

Cache Servers

The telecom regulator also asked the cache server distributors and sought their support to reach
Facebook, Google and YouTube.  A cache server is a dedicated network server or service acting
as a server that saves web pages or other internet content locally. By placing previously
requested information in temporary storage or cache, a cache server both speeds up access to
data and reduces demand on an enterprise’s bandwidth.Facebook is taking cache server service
from the local office of Ericsson, while Google and YouTube are obtaining the service from
local company REVE Systems.REVE Systems has not replied to the BTRC’s letter.Ericsson
Bangladesh said it is not the local representative or distributor of Facebook “and for the sake of
clarity, it is not a party to the matter at hand”.But the Swedish company has informed its contract
partner Edge Network Service about the matter, according to a letter signed by Abdus Salam,
country manager of Ericsson. ( FB july 1 VAT)