Through a recently issued presidential ordinance, the government has reduced withholding and sales taxes on imported phones valuing between $30 and $100.
According to the salient features of the ordinance published by Federal Board of Revenue (FBR), “Prior to the promulgation of the Tax Laws (Second Amendment) Ordinance, 2019, the rate of withholding income tax on the import of mobile phones was Rs730 in case of a mobile phones having value exceeding 30 US Dollars and up to 100 US Dollars. In order to complement the efforts of the government towards promotion of financial inclusion, income tax at the import stage in respect of mobile phones having value exceeding 30 US dollars and up to 100 US dollars has been reduced from Rs730 to Rs100 per mobile phone.
“Sales tax on the aforementioned mobile phones has also been reduced from Rs130 to Rs100. For mobile phones valuing above $100, the sales tax has been revalued from Rs1,320 to Rs200.”
Prior to this move, the government had already revised the sales tax rates on mobile phones, reducing them from Rs1,470 to Rs1,320 for phones costing up to $100. The maximum amount of sales tax, that is for phones above $500 value, was also reduced from Rs10,300 to Rs9,270.
Meanwhile, the response from the mobile manufacturing industry in the country to the above amendments has been that of exasperation.
One company in particular, Transsion Tecno Electric Pakistan, known for its multi-brand smartphones as its core products, published an advertisement in various newspapers, decrying the reduction of taxes on imported phones. The company’s opinion is that such a move will not only lead local manufacturers to go out of business and shut down but it will also lead to unemployment. The advertisement also warned of foreign investment not coming in the country to set up local factories and the likelihood of Pakistan’s imports continuing to increase from countries like China, Vietnam, Bangladesh etc.
FBR’s earlier move to reduce such taxes was “in line with its effort to eradicate the menace of smuggling”. The move coincided with international travellers having to register their phones with Pakistan Telecommunication Authority (PTA).
The latest ordinance has been issued in order to enable the sharing of information between FBR and Financial Monitoring Unit (FMU) to facilitate the latter perform its functions as laid down in the Anti-Money Laundering Act, 2010, and to ensure compliance with the Financial Action Task Force regulations.