VAT returns do not reflect Facebook, Google’s real earning

There have been speculations that digital ad spaces get commercials worth at least Tk2,000 crore from Bangladesh through Facebook, Google and Amazon every year, but the companies' VAT return submissions suggest the incomes are not as hefty.

The National Revenue Board (NBR) is happy with the VAT registrations, saying the revenue regulations will pave the way for better transparency in payments by the global tech giants operating in Bangladesh.

Google and Facebook recently paid VAT and submitted returns for two months while Amazon paid one month's VAT and submitted its returns to the NBR.

Against the Tk16.67 crore revenue in July this year, the government fetched Tk2.65 crore VAT from Facebook. Earlier, the company paid Tk2.44 crore VAT against its Tk16.27 crore revenue in June in Bangladesh.

Officials of the revenue board said the government could earn Tk30-32 crore annually in VAT from Facebook, while the social media giant's annual revenue could be Tk200-220 crore.

SM Humayun Kabir, commissioner at VAT commissionerate, Dhaka south, said, "Prior to the registration, the government used to receive VAT from Facebook in a scattered way. The VAT would be charged on credit card bills. VAT registration now will make the payment transparent."

Prior to the registration, Facebook in the 2020-21 fiscal year paid the government Tk16.17 crore in VAT through Httpool – a local partner for the media agency. The 15% VAT came from Facebook's revenue from advertisements, content boosting and other income slabs. The VAT-revenue calculation suggests the company had a Tk107 crore turnover in Bangladesh in 2020-21 FY.

Revenue board officials said the VAT payment only includes ad orders placed by Httpool as there were other individual-level payments for Facebook ads using credit cards or unofficial transaction channel hundi.

According to Facebook's official data, the company's global revenue amounted to $86 billion in 2020.

What about Google and Amazon?

Google and Amazon took their VAT registration in May too, but their revenues in the next two months were way less than those of Facebook, according to their return submissions.

Google paid Tk2.29 crore VAT against its Tk15.35 crore revenue in May-June came from ads, cloud servicing and other slabs as Amazon's revenue in Bangladesh was only Tk3.52 crore in that period. Revenue from the two tech firms could be Tk90-100 crore and Tk40 crore respectively by the end of the current year.

Google's worldwide revenue in 2020 amounted to $181 billion while Amazon's was $21.3 billion.

A Tk3,000-3,500 crore market?

The government earlier made rough estimates on ads to digital platforms. The Bangladesh Telecommunication Regulatory Commission (BTRC) in 2019 told the High Court while responding to a writ that three mobile network operators made Tk435 crore ad payments in the last five years to tech firms such as Facebook, Google, YouTube, Imo and WhatsApp.

Apart from the payments by the telcos, the revenue board assumed businesses and individuals also had spent a lot for advertisements.

According to the Association of Television Channel Owners (Atco) and ad agencies, the spending could be as much as Tk2,000-3,000 crore.

On condition of anonymity, the Bangladesh chief of an international ad agency said, "We try to get the updates on what is going on in the market. I am not cent percent sure, but the size of Bangladesh's digital ad market is now around Tk3,000-3,500 crore."

Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services (BASIS) commented that the revenues the tech trio reported after the registration do not seem to reflect reality.

"If not exactly Tk2,000 crore, their earnings from Bangladesh must be around the mark," he added.

"They could have paid Bangladesh only for the ads received by local agents as commercials with other payment methods remained outside the counts. Plus, many businesses still might be unaware of the official payments. This might have contributed to the trio's low revenue figures," he added

Are illegal ad payments off now?

Moinul Khan, director general of VAT Audit, Intelligence and Investigation Directorate, was asked whether all payments for digital ads have now come under official channels after the VAT registration of tech giant trio.

"No, not yet," Khan replied.

"But this is the beginning. From now on, we will have a clear understanding that would help us chart out our next step. We will be able to verify the ad spending by local businesses with the VAT payments by the tech giants."

'Govt at least will get the accurate info'

Apart from VAT payments, revenue officials and technology leaders underscore the scope the registrations provide for getting accurate information about revenues of the tech firms.

"The government used to receive no VAT from them. Now the registrations, a milestone achievement for the revenue board, will help NBR to make at least the VAT estimates," said Syed Almas Kabir, president of BASIS.

He said the illegal channels for ad payments would get closed gradually.

Revenue board official SM Humayun Kabir echoed Kabir on the scope of getting the accurate information.

"It will be easier to assess if they are paying the exact amounts. The government is likely to fetch a handsome amount in VAT. Besides, VAT registration largely enables the government to exert pressure on firms regarding complaint issues," he noted.