Higher duty on cell phones to encourage smuggling

Experts see slim chances of increase in government revenues

KARACHI: The federal government has increased regulatory duty on the import of mobile phone sets, which experts say may discourage digitisation and encourage smuggling of cellphones.

In an effort to curtail growing imports, the Federal Board of Revenue (FBR) imposed regulatory duty on 731 import items, of which 331 were new goods while 307 were subject to a higher duty in the range of 5% to 30%.



Among the key goods impacted by the duty are mobile phone sets. The FBR has imposed a duty of Rs250 on smartphones worth Rs15,000 or above while Rs300 has been levied on cheaper handsets worth Rs6,000 or above.

The FBR’s decision was aimed at balancing the increasing gap between imports and exports since the country imports one million handsets every month.

However, industry experts say the duty on mobile phone sets will hurt the information technology sector as it will encourage smuggling of handsets as the incentive for illicit trade has increased with the levy.

Since high duties on any industry become an incentive for smuggling, “so chances are very low that the higher duty on mobile phones will increase government revenues,” said IT expert Parvez Iftikhar.

The government is making efforts to increase digitisation in the country, however, the taxes on mobile phones would hamper smartphone penetration, which would eventually hurt the digitisation goal.



“Cellular companies paid the government for 3G/4G licences and besides the fee they are also paying taxes, so the government should be helpful in promoting their business instead of hindering work with the levy of taxes,” said a manager of a cellular company on condition of anonymity.

Pakistan has the honour to be the first country to adopt the Sustainable Development Goals (SDGs) 2030 through a unanimous resolution of parliament, however, most of the SDGs can only be achieved through spread of broadband in the society, said Iftikhar.

Duties on smartphones meant less people would buy them or they would delay their purchases, in any case the smartphone demand would decrease, the industry expert observed.

Published in The Express Tribune, October 19^th, 2017.

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