Mobile Phones Imports Grow by 20% After Months of Continuous Decline

Mobile phone imports in Pakistan registered massive increase of over 20 percent in the month of January 2017 as compared to the same period of last year i.e. January 2016.

However, mobile phone imports registered decline of over 7 percent in the first seven months (July-January) of the current financial year as compared to the same period of last year, after the government doubled sales tax for medium and high category/smart phones import.

According to the latest data released by the Pakistan Bureau of Statistics (PBS), mobile imports registered over 20 percent increase in the month of January and remained at $70,171 against $58,211 during the same period of last year.

According to the PBS, total imports of mobile phone stood at $399,408 in the first seven months of current fiscal year 2016-17 against $433,275 during the same period of last financial year.

Overall telecom imports saw decline of over 2 percent during July-January 2016-17 compared to the same period of last year. Total imports were recorded at $780,907 during this period compared to $799,254 in July-January 2016-17, while registered 15.30 percent growth as compared to $104,757 during January 2016, it is $120,787 in January 2017.

Other telecom apparatus import also witnessed growth of over 4 percent during the first seven months of current financial year as it stood at $381,499 against $365,979 during the same period of last year. When compared to the January 2016 other telecom apparatus imports registered 8 percent growth as it was $46,546 compared to $50,616 in January 2017.

According to the latest GSMA report, Customs duty and sales tax levied on imported handsets are applied using flat rates, which have a greater impact on the poorest consumers. Reducing these taxes may lower the costs of mobile ownership and drive higher penetration. In the medium term, tax and regulatory fee reductions on the mobile sector have the potential to increase wider tax revenue for the government, due to the benefits from increased mobile usage and growth of investment across the economy. In the short term, the government may consider alternative ways to cover the tax revenue shortfall from removing sector specific taxes.

As an illustrative example, based on the 2016–17 budget, a modest increase of less than 0.5% of total general sales tax (GST) may be sufficient to cover revenue shortfalls for each reform scenario. This estimate is intended to provide perspective on the scale of tax revenue shortfalls. Aside from changing the GST rate, changes to other general taxes, such as direct taxes, are alternative options.

Reducing the rate of sales tax/FED on mobile services has the potential to reduce prices for consumers. A reduction from the current rates of 18.5–19.5% to a uniform 17% could generate an additional 1.8 million connections over the four-year period to 2021, potentially increasing GDP by $1.2 billion in 2021. Across the wider economy, total investment could increase by a combined $480 million over the same period.