The Covid-19 pandemic has pushed us to go for more contactless financial transactions with the help of disruptive technologies. Consumers took refuge in e-commerce as a survival strategy during the nationwide lockdown.
According to the Bangladesh Competition Commission, the size of e-Commerce in Bangladesh climbed to Tk166.16 billion until August 2020, roughly 29.67 times the amount in 2016 (The Financial Express, 12 October, 2020). The e-Commerce Association of Bangladesh estimated in April 2020 that the size of e-commerce in Bangladesh would be around Tk8,000 crore with an annual growth rate of approximately 50% (The Daily Star, 8 April, 2020).
E-commerce is not just the buying and selling of commodities or services through an electronic medium, it is also an ecosystem which provides access to all the stakeholders in economic transactions and thus helps reduce inequalities.
Terms like digital commerce, gig economy, etc., are also used interchangeably with the term e-commerce. According to LightCastle Partners, currently three types of e-commerce are prevalent in Bangladesh – business-to-business, business-to-consumer and consumer-to-consumer.
These days, business transactions are frequently done through disruptive technologies, like social media platforms, which also coined the term f-commerce.
The definition of disruptive technologies is linked to disruptive innovation. When a new innovation creates a new market and adds new value to the product – which disrupts the existing market and value chain – this is called disruptive innovation.
For example, Uber or AirBnB created an online market for renting cars or houses on demand which affected the existing rent-a-car or hotel business worldwide. The same goes for mobile financial services and online marketing, etc.
The post-Covid-19 neo-normal reality will make e-commerce more integrated in our regular economy with the help of disruptive technologies. So, disruptive technologies should be made more accessible, faster and cost effective through robust and comprehensive policies, rules and regulations.
However, technology always changes faster than laws and regulations. Once, Moore's Law said technology overhauls itself within two years. In this Fourth Industrial Revolution, the algorithms of artificial intelligence (AI), big data and the Internet of Things (IoT) have made this process faster, so that it might take just a couple of months, if not, then just a couple of weeks, to change the whole market landscape.
That is why, Bangladesh must act promptly to keep up with e-commerce through disruptive technologies. The International Telecommunication Union stated that these new technologies – blockchain, AI, fintech, smart and sustainable cities, IoT, and big data – hold great potential for human progress and urged for multi-stakeholder partnership for achieving the Sustainable Development Goals (SDGs).
Goals 1, 8, 9, 10, and 12 of the SDGs promote digital innovation and its inclusion in financial activities in order to reduce inequality, foster economic productivity and promote inclusive and sustainable industrialisation.
Strategy 3.6.5 of the National ICT Policy 2018 of Bangladesh focuses on creating a necessary environment for using ICT in business and commerce. Strategy 3.8.5 acknowledges the role of Digital Commerce and Digital Transactions for increasing overall national productivity, and emphasizes the importance of a digital transformation of existing industries.
Meanwhile, Strategy 3.8.6 ensures digitalisation of financial services. The proposed Digital Commerce Policy 2018 comes up with the aim to ensure more digital financial inclusion through new technologies.
However, concerns have arisen regarding taxation on e-commerce through disruptive technologies due to some policy gaps.
One of the prime concerns is the imposition of value-added tax (VAT). Many new and small enterprise entrepreneurs who are using disruptive technologies to buy and sell products will suffer because this would amount to double taxation on them, as VAT is already deducted while adding value to the product in production level.
Although e-commerce ensured the full operation of economic activities ensuring social distancing during the Covid-19 pandemic, this sector was left out of the government's stimulus package worth Tk20,000 crore that was granted to cottage, micro, small and medium enterprises.
Although this industry is worth Tk8,000 crore and engages about 1.25 lakh people – contributing around 2% to the country's gross domestic product currently – it is still considered an informal sector.
However, many of the e-commerce businesses provide a 0.6% tax on their overall turnover and 5% as VAT. The food related e-commerce business needs to pay 15% VAT. (The Daily Star, 14 May 2020). Therefore, this sector deserves a tax exemption for a couple of years considering its importance for inspiring new entrepreneurs, creating new jobs and providing swift services to consumers.
Giant platform owners like Facebook, Amazon, Apple, Netflix, and Google are registered in other countries in which Bangladesh does not have territorial jurisdiction. This creates complexity to impose taxes upon digital marketing run on these platforms. The absence of a single international treaty in this regard has left the country without an effective remedy to impose taxes.
Sometimes the digital transactions through these disruptive technologies might go wrong and user data might be needed to investigate the possible digital forgery or fraud. Or, sometimes consumers' rights might be denied on e-commerce platforms operated by foreign companies.
That is why Bangladesh needs a Mutual Legal Assistance Treaty (MLAT) to be done with many countries – in order to deal with trade disputes in online platforms. The liability of the intermediaries, like platform owners, should also be outlined in the MLAT.
Therefore, the proposed Digital Commerce Policy 2018 should reflect all the above-mentioned issues in order to boost disruptive technology based digital financial transactions.
However, the Digital Commerce Policy lacks some important definitions, including of: disruptive technology, intermediary, blockchain, big data, machine learning, Internet of Things, electronic fraud, electronic scam, etc. These definitions need to be updated in the policy because the absence of an important definition creates complexity in adjudicating a financial dispute.
The Digital Commerce Policy should also maintain compliance and harmony with other ICT-related laws – such as the National ICT Policy 2018, National Cyber Strategy 2014, ICT Act 2006, and the Digital Security Act 2018 – in the context of disruptive technologies. This way, we can ensure the rights use of disruptive technologies in order to boost the digital economy in Bangladesh.
The author is senior lecturer at School of Law of Brac University