New Mobile Phone Taxes to Affect 5G Spectrum Auction: PTA

The Pakistan Telecommunication Authority (PTA) has warned the government that the significant increase of 17 percent in sales tax on mobile devices in the mini-budget is likely to hamper the planned 5G spectrum auction, besides the negative impact on Digital Pakistan vision and hamper the development of startup businesses in e-commerce and digital financial services.

Official documents available with ProPakistani revealed that the authority had shown serious concerns while observing that the significant increase in sales tax would hit the general public badly.

After implementation of the Finance (Supplementary) Act, 2022, the Federal Board of Revenue (FBR) has implemented a 17 percent sales tax on devices values above $200 for Completely Built Unit (CBU) being imported by commercial and individuals within the territory of Pakistan. This implementation of the Finance (Supplementary) Act 2022 has adversely impacted the general public.

PTA has made several observations and submitted them for government consideration:

• Affordability Impact on Mid-Range Mobile Phones: It is clearly visible that the new tax regime impact on Mid-Range mobile phones is significant ranging from an increase of 119 percent in $100-200, 199 percent in $200-350 and 138 percent in $350-500. This impact has affected the affordability for general consumers and will restrict them from buying smartphones for use in Pakistan.
• Adverse Effect on Digital Pakistan Vision: The exorbitant increase in customs duties due to Finance (Supplementary) Act 2022 will adversely impact Mid and High-End mobile device consumers, who intend to use such mobile devices for their businesses, e-commerce, digital financial services, etc. activities. The high prices for a mobile device will restrict them from using such devices and impact the Digital Pakistan vision and development of a 4G smartphone ecosystem in Pakistan.
• High-End Mobile Devices vs Local Manufacturing: The PTA has issued mobile device manufacturing authorization to 30 companies. In 2021, these companies manufactured over 24 million mobile phones (10 million 4G smartphones in the Low/Mid-Range category and 14 million 2G phones in the basic low-end category). Currently, no company is manufacturing any high-end mobile devices (above USD 500 category). With an increased custom duty of 85 percent from the previous tax regime, this high-end category of mobile devices available in Pakistan will be impacted adversely in terms of consumer affordability as well as will adversely impact the PM’s vision and endeavor to family relief to common citizens against the price hike.
• Impact on 5G Spectrum Auction: Spectrum auction for 5G technology is planned in near future, however, due to the increase in customs duties, the availability of 5G mobile devices will a challenge due to high taxation being applied. This will likely hamper the 5G spectrum auction initiative by the GoP.

The Authority has concluded that this significant rise in customs duties shall have a negative impact on the government’ Digital Pakistan vision and hamper the development of startup businesses in the e-commerce, digital financial services, freelancing, IT services, e-health, etc, where such mobile devices are a basic necessity for their business needs.

In this modern day and age, a mobile device is no longer a luxury but it has now become a basic necessity in this age of technological era, it added.