The NA panel instructed the FBR to carry out an analysis of the existing taxes and their impact on the use of smartphones. It was asked to submit a report by mid-March and incorporate changes in the next budget. Photo: file
ISLAMABAD:
Mobile phone users pay over 55% of the price of a handset in taxes, which is exorbitant, reflects the narrow-mindedness of policymakers and requires urgent reduction in levies to promote digitisation, revealed proceedings of a parliamentary committee meeting.
The National Assembly Standing Committee on Finance on Tuesday described heavy taxes on mobile handsets as irrational and narrow thinking that served the purpose of the Federal Board of Revenue (FBR) at the expense of the economy. The government was charging over 55% of the prices of mobile phones in taxes, disclosed Member Operations Customs of the FBR Shakil Shah. He explained that taxes were collected on the basis of six price bands, starting from the base price of $30 to over $500 per set.
On a minimum value of $700, the FBR charges Rs16,000 mobile levy, Rs22,000 regulatory duty, Rs11,500 withholding tax and above all 25% of the value of the handset inclusive of taxes as sales tax. By imposing these four types of taxes on a single handset of over $700, the FBR collected Rs18 billion in the last fiscal year.
Levies and regulatory duties are imposed on goods that the government wants to discourage as a policy measure. The FBR’s move to collect the levy and the duty on cellphones is contrary to Prime Minister Shehbaz Sharif’s vision of digitisation of the economy.
The FBR collected taxes worth Rs82 billion on phones in the last fiscal year, which was equal to 0.7% of total taxes. For the sake of a few billion, the FBR could not take the economy hostage, remarked MNA Syed Naveed Qamar.
“I have bought a Rs370,000 phone but am not activating it due to a Rs190,000 tax on its registration,” said MNA Sharmila Faruqi. When these taxes were imposed, smartphones were considered a luxury, which “now are a necessity but the FBR does not realise it”, said Naveed Qamar, Chairman of the Standing Committee on Finance.
“Pakistan does not exist for the sake of the FBR and there is a need to go beyond the narrow thinking of collecting taxes at the expense of the economy,” said the committee chairman. The standing committee instructed the FBR to rationalise the taxes. There were exorbitant taxes on the purchase and registration of mobile phones and people were penalised for using advanced technologies, remarked MNA Ali Kasim Gilani, who brought the issue to the standing committee.
The NA panel instructed the FBR to carry out an analysis of the existing taxes and their impact on the use of smartphones. The committee chairman asked the FBR to submit the analysis by mid-March and incorporate changes in the next budget. Former foreign minister Hina Rabbani Khar questioned the rationality behind imposing exorbitant taxes.
According to details submitted in the standing committee, new or refurbished mobile phones brought to Pakistan by overseas passengers are assessed for the imposition of duty and taxes in accordance with the prescribed slabs under the Pakistan Customs Tariff. The Customs value of mobile phones is determined under the relevant valuation ruling. The valuation ruling covering mobile phones is changed from time to time. Where no valuation ruling is available for a particular model, the assessment is made on the basis of values reflected in the previous 90-day import data.
Sales tax on imported mobile phones is charged at the standard rate of 18% if the import value per set in completely built unit (CBU) condition does not exceed $500, whereas the mobile phone sets exceeding $500 are charged an enhanced sales tax rate of 25%.
Chairman of the Pakistan Telecommunication Authority (PTA) said that he also paid Rs163,000 in taxes on the mobile phone. He disclosed that 98% of locally assembled mobile phones were not 5G-enabled, and the government plans to hold the 5G licence auction in February.
Sixty per cent of locally assembled phones are smartphones, but only 2% are 5G-enabled, said the PTA chairman.
Member customs said that there was almost 50% arbitrage in favour of local mobile phone assemblers that needed to be checked. Against over 55% taxes on imported phones, the locally assembled phones are charged 6% tax.
