The caretaker government has targeted cell phone users in its first move to increase declining tax revenues, as it slapped up to Rs1,000 in sales tax on smart phones at the import stage.
The Federal Board of Revenue (FBR) has estimated generation of at least Rs5 billion per annum through this measure.
The move came at a time when tax authorities are facing serious problems in meeting the annual collection target of Rs2.381 trillion. The decision is expected to help curbing increasing imports of luxury items, aimed at reducing the import bill due to declining foreign exchange reserves.
On Friday, the FBR issued a notification that has made it obligatory for importers to pay Rs500 in sales tax on basic cellular phones. On the import of smart phones that are described as ones having 4GB basic memory and a touch screen, the importer will pay Rs1,000 in sales tax at the import stage.
A person buying the expensive Apple iPhone was paying just Rs250 as sales tax, which is a joke, FBR Chairman Ali Arshad Hakeem said while talking to The Express Tribune.
Earlier, the FBR was charging nominal sales tax at the activation stage, a practice that was abandoned years ago as no one goes to cellular companies to activate phones, FBR’s Member Inland Revenue Operations Raza Baqir said. He said now tax calculation will be made at the import stage, which will help recover dues.
According to the FBR’s notification, the import of satellite phones will also be subject to a similar rate of taxation. Cellular and satellite phones’ import is also subject to 5% income tax.
In a recent briefing to Prime Minister Mir Hazar Khan Khoso, the finance ministry had proposed measures to curb the import bill by levying taxes on luxury items.
Pakistan is a big market for all types of smart phones, and the country spends millions of dollars per annum on import of cellular phones, particularly smart phones.
The officials added that similar measures are also expected in the coming months, aimed at boosting revenue collection.
Published in The Express Tribune, April 6th, 2013.
Like Business on Facebook to stay informed and join in the conversation.
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
This will help reduce the increasing role of mobile phone in Pakistani society, great! And poor people are not going to buy touch phones so they will not be affected much.
@adnan: What is your definition of a luxury? To be able to do homework assignments on your tablet or phone? To have past papers in your smartphone? To be able to check your mail? To be able to make presentations on the smartphone or tablet? Or to have complete educational courses on the tablet/smartphones?
Amnesty schemes for the criminals bringing in cars , bikes illegally into the country and covering it up by taxing us? God help us if this is how the govt officers in our country think.
@Critique: Um excuse me? Why are the upperclass any different? If the government wants to raise money they need to take measures against the hundreds of politicians evading them. This is not the solution to the problem it is simply avoiding it. Also if one has any knowledge of basic economics they would know that this tax is infact regressive. Tax on smart phones also means that students trying to acquire higher education in engineering fields have another hurdle to go through. The scheme is ill planned and stupid.
actually problem is that a basic touchscreen phone is available in market is costing around 5000 why should a comman person is being forced to pay such a hefty amount. they should apply this on apple iphone and samsung galaxy s3 etc.
its really good move.smart phones r not necessasity rather luxury.so for luxury tax is a good measure.
I've no problem with paying this tax but as said above the tax should be relative to price not specs. 4GB touchscreen phone can be purchased in Chinese sets for as low as 5000-10000Rs while big brands cost around 30K+. I don't think its justified.
increased tax on incoming calls now tax on buying phone. Soon they will impose tax if someone even THINK about it.
Instead of targeting the tax defaulter the cowardly caretakers have shown their lack of commonsense by this measure.
Good.. but would be better if the tax was relative to mobile.. like for smartphone worth 8000 (tax is 1000) and also for smartphone of 80000 (tax is also 1000)
And all this collected money will be used for making Pakistan better place. YEAH RIGHT!!!! PFFFT.
I agreee that while a person who is paying for an I-phone or a BB is not going to be concerned about paying an additional 1000 rs. But what about the tech students who need to buy a smart phone to cope up with education these days? Do you think they'll be able to fork out an additional thousand rs for a cheap chinease replica phone? I'm guessing no.
Instead of slapping Rs1000 on cell phones , how about slapping the tax dodgers and squeeze money out of their wallets.
Much the best,excellent and august step taken by FBR because mobiles phones were being used as the luxury and prodigal items than necessity.But the first and foremost and most important question rises here.id est,now how mobile phones' smuggling shall be stopped by the government,customs' officials and FBR because now there are lots of chances of mobile phones' smuggling?????
excellent move 1000 rps is nthn for a person who is going 4 apple or blackberry...tax dem mreee..
@Ahmad: ----`The Rs. 1000 sales tax shall be charged on the luxury/ smart cell phones with touch screen etc . Such cell phones are used by elite and upper middle class and they can pay the additional price. What is the problem on charging taxon rich people?. But be assured there shall be influx of cell phone in the grey market to avoid taxes .. The illegal activities may be carried out by quite religious( at least projected in the society) businessmen and shell be purchased by the equally religious populace. The ECP is looking for sadiq and Ameen contestants for Assemblies !!!! Great exercise.
Does FBR have powers to levey Tax.This should be challenged in court. All FBR is doing is announcing Amnesty Schemes and issuing SROs
Unelected cabinet has dicataorial powers. No mandate no problem.
Good move - targetting the upper class to meet tax revenues.
This is wrong. Cell phone services are already taxed heavily. Now phones are being taxed heavily. on a 100 rupee recharge the govt already takes Re.15-20. If they want to collect taxes.....they should target the feudals and the industrialists.
Stop taxing the common man.
We already stay with 12 hour of power, gas and cng and electricity. This proves again that there is a serious disconnect between the people and the government.
Again another regressive tax. Rs 1000 will be a larger proportion of the phones price for cheaper ones, and a smaller proportion of the price of more expensive phones.