New taxes to discourage mobile phone assembly, telecom association warns

Published June 21, 2024
Pakistan fulfils 95 per cent of its mobile phone demand through local manufacturing/assembly compared to a five-year (2019-2023)  average of 67pc and eight-year (2016-2023) average of 47pc.—AFP/file
Pakistan fulfils 95 per cent of its mobile phone demand through local manufacturing/assembly compared to a five-year (2019-2023) average of 67pc and eight-year (2016-2023) average of 47pc.—AFP/file

ISLAMABAD: While telecom operators and mobile phone manufacturers have expressed concerns over taxation measures and the subsequent hike in service and set costs after the budget is approved, traders have already started charging higher prices for the current stocks.

Telecom Association of Pakistan (TOA) has challenged the proposed Finance Bill 2024-25 in a letter to IT and Telecom State Minister Shaza Fatima. The letter highlights issues, including the proposed 75 per cent advance tax collection on mobile services for non-filers, terming it impractical due to existing infrastructure limitations.

The association comprises all existing cellular mobile operators, long-distance international operators, wireless local loop operators, local loop operators, and fixed-line operators.

The letter said that penalising telecom operators for consumers’ non-compliance through the Income Tax General Orders by the FBR is not justified. The industry maintains that telecom operators are merely enablers, not responsible parties in tax-related disputes.

Set and service prices to rise after budget takes effect

It added that the measures in the Finance Bill could cripple the sector and derail the government’s “Digital Pakistan” vision.

Earlier, the Global System for Mobile Communications Association (GSMA) had raised similar concerns over the imposition of taxes on mobile handsets in the budget 2024-25, terming it a move that will shake the confidence of investors interested in entering the Pakistani market.

Meanwhile, assemblers have also expressed concerns over increased mobile phone taxes and the non-implementation of promised measures.

Pakistan Mobile Phones Manu­facturers Association (PMPMA) Chair­man Mian Abdul Rehman said that if the proposed tax measures are implemented after July 1, consumers will face higher mobile service costs and limited access to affordable mobile handsets.

He added that even the low cost of mobile phones will increase after the taxation measures in the budget.

The government has proposed to increase sales tax on mobile handsets below $500. The PMPMA has said it would blow digital penetration among low-income groups and widen the digital divide between males and females in low-income groups.

Mr Rehman said that after the 18pc sales tax, the cheapest smartphone valued at around Rs25,000 will be sold for Rs30,000, which is damaging for the people whose earnings and livelihood are based on digital-based transport, like ride-sharing based on apps or the supply of goods through apps.

“Another issue is that the government has retained a 25pc duty on import parts for mobile manufacturing and its allied parts, but there is no duty on import of allied items like complete chargers, hand free, blue tooth, etc.,” Mr Rehman said.

He added that under these conditions, the government discouraged local assembly and manufacturing of allied items. “But the government demands mobile exports from Pakistan.”

Published in Dawn, June 21st, 2024

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