Tax incentives drive up imports of telecom equipment, cellphones

Imports in July stand at $114.01m, 54% higher than in the same month of last year

Salman Siddiqui September 05, 2017
The surge in imports of telecom equipment came as a result of increased demand for telecom services. Almost every cellular operator is upgrading its communication network to 3G/4G technologies. PHOTO: FILE

KARACHI: Following the announcement of tax incentives in the budget for 2017-18, the import of telecommunication equipment and mobile phones has increased more than 50%.

The implementation of budgetary measures has facilitated the telecom industry and people as well as helped the government control smuggling of goods into the country.

According to latest data of the Pakistan Bureau of Statistics, the country imported telecom apparatus and mobile sets worth $114.01 million in July 2017. This was 54% higher than imports of $74.26 million made in the same month of previous year.

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In the budget, the government had replaced customs duties of 11% and 16% with a uniform regulatory duty of 9%. It reduced customs duty on smartphones to Rs650 per set from Rs1,000. Similarly, it reduced withholding income tax on mobile calls to 12.5% from 14% and federal excise duty on calls from 18.5% to 17%.

Office-bearers at the Karachi Electronic Dealers Association have said on multiple occasions that 60% of the mobile phones available in the country are smuggled.

The budget incentives may have helped the government replace the smuggled goods with legal imports.

An official at a mobile phone service providing company said the surge in imports of telecom equipment came as a result of increased demand for telecom services and the tax incentives facilitated the mobile phone services companies in that regard. Imports in June were also higher.

Almost every cellular operator is upgrading its communication network to 3G/4G technologies and expanding to new areas.

Months back, Jazz won a 4G licence. Prior to this, it acquired Warid Telecom. Last year, Telenor got a 4G licence and a few months ago, Ufone’s CEO announced that the company would completely shift its network in Lahore to 3G technology.

“Some of the operators may be importing the equipment to upgrade and expand their networks under the PTA (Pakistan Telecommunication Authority) Rollout Obligations while others may be doing it to meet consumer demand,” he said.

The official added phone operators made investments under two strategies. First strategy called “front loaded” binds the operators to invest heavily in equipment at the beginning of the year, which might be the case in July 2017.

The second strategy called “rear loaded” requires the operators to make investment in the middle or end of their financial year. This strategy is adopted by the operators facing budget constraints.

Tax exemptions on IT exports to promote sector

He said Pakistan was fast becoming a digital country while data consumerism had yet to show business growth. International surveys and expert opinions suggest investments in the IT and telecom sector pays back in the shape of economic activities, particularly the creation of job opportunities

According to breakdown of the data, imports of telecom equipment increased 62% to $45.44 million in July 2017 from $28.05 million in the same month of previous year. Similarly, imports of mobile phones rose 48% to $68.57 million from $46.20 million.

However, imports of equipment and phones had slipped to $1.35 billion in the previous fiscal year 2016-17 from $1.36 billion in FY16.

Published in The Express Tribune, September 5th, 2017.

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