The Ministry of Information Technology and Telecommunication has opposed the Federal Board of Revenue’s (FBR) taxation on mobile phone import under Baggage Rules and recommended reduction in duties on smartphones to achieve the digital vision of the government.
Official sources revealed that a meeting was held in the Ministry of IT & Telecom where, besides the Federal Board of Revenue (FBR), other stakeholders also participated and discussed mobile phone import under the Baggage Rules.
The MoITT confronted FBR on taxes on mobile phone imports, saying that it is negatively affecting the IT sector as well as the digital agenda of the government.
FBR had removed duty-free import of phones after reported misuse and information that expensive mobile devices were mostly being registered by using international passengers’ data. Furthermore, the government desired that there should be uniformity in the application of taxes whether brought into Pakistan by passengers or locally procured and, therefore, the exemption was withdrawn to avoid this anomaly. The FBR official said that around Rs 10 billion has been collected from taxes on mobile imports.
However, no final decision was reached on reviewing taxation and allowing duty free import of mobile phones.
A senior official of the IT Ministry said that if a sector could contribute to the national economy in services and exports, it is the IT sector. He said that if mobile phone manufacturing plants are not available, it is not feasible to import mobile phones with such taxes and duties. He added that the matter had been taken up with the FBR.
Presidents/chief executive officers (CEOs) of the telecom companies, Federal Board of Revenue (FBR) and Ministry of Information Technology also submitted their viewpoints on taxation of mobile phones and allowing duty-free import of mobile phones, on December 24, at a meeting held at the Ministry of IT, however, no decision was taken in this regard.
Chairman FBR Shabbar Zaidi had said before different parliamentary panels that recommendations for allowing duty-free import of mobile phones under Baggage Rules would be tabled before the Economic Coordination Committee (ECC) of the Cabinet. Baggage Rules were misused in the past, compelling the government to withdraw the facility.
CEOs of four telecom companies collectively informed Abdul Hafeez Shaikh, Advisor to the PM on Finance, about the taxation on import of mobile devices and smartphones. The companies recommended retention of the current tax structure on low-end 2G handsets/feature phones (i.e. Rs. 500 as tax per device); reduction in tax/duty on 3G/4G handsets (smartphones) below Rs. 10,000 and cap it to a maximum of Rs 1,000 per device and reduction in tax on smartphones in the higher price brackets and cap it to a maximum of Rs 5,000 per device.
They further informed that a tax regime that focused only on the short-term gains is going to negatively impact the uptake of the Internet of Things (IoT) ecosystem in the country including smartwatches, sensors, smart metering, smart cities and other upcoming machine-to-machine (M2M) systems. This shall also impact the government’s efforts to introduce 5G in the future.
Pakistan imported mobile phones worth $498.5 million during July-November (2019-20) as compared to the import of $304.7 million during July-November (2018-19), showing a growth of 63.62 percent, according to the latest data issued by Pakistan Bureau of Statistics (PBS).