Does PTA Taxation On Imported Smartphones Benefit Pakistan? [Analysis]

If you are looking for a simple answer to if PTA Taxation on Smartphones benefit Pakistan, that would be YES!

How?

Let me explain:

In September 2022, local manufacturing facilities produced or assembled 1.09 million mobile phone devices.

Local manufacturing plants have manufactured/assembled 16.7 million phones handsets during the first nine months – January to September 2022 – compared to 1.24 million commercially imported phones handsets, PTA says.

Local manufacturing facilities produced/assembled 24.66 million mobile phone handsets in 2021 as compared to 13.05 million in 2020, a historic rise of 88 percent.

Official data from PTA showed that there were 10.26 million commercial imports of cell phones in 2021, compared to 24.51 million in 2020.

There were 9.46 million 2G phones and 7.24 million smart phones among the 16.7 million mobile phones that were made or put together locally.

Also, according to data from the PTA, 54% of these phones in Pakistan are smartphones and 46% are 2G.

Nevertheless, Pakistan imported mobile phones in the amount of $160.271 million during the first quarter (July-September) of the current fiscal year 2022-23. This represents a decline of 67.62 percent when compared to the amount of $494.960 million that was imported during the same time period in the previous fiscal year.

Pakistan: PTA Clarifies Its stance Regarding Tax Exemption on Imported Phones for Overseas Pakistanis

According to data provided by the Pakistan Bureau of Statistics (PBS), mobile phone imports experienced a month-on-month (MoM) decline of 7.38 percent. It brings the total to $58.407 million in September 2022 from $63.06 million in August 2022. This figure represents a decrease of 7.38 percent from the previous month.

When compared to the $209.013 million that was imported during the same month in the previous year, mobile phone imports in September 2022 had a year-on-year (YoY) growth rate that was 72.06 percent lower than the previous year. In Pakistan, a favorable environment for the manufacturing of mobile devices has been created as a result of the successful implementation of Device Identification Registration and Blocking System (DIRBS), as well as other policies that are conducive to the manufacturing of mobile devices, such as the mobile manufacturing policy.

Our Take on the Matter! (Recommendation to FBR & PTA)

The figures presented above indicate that the local smartphone manufacturing and assembly sector has vastly improved. Pakistan is one of the largest marketplaces in the world for mobile phone users. And, in order to remain competitive, smartphone brands needed to consider assembling/manufacturing phones in Pakistan in order to lower the costs associated with importing CBUs and ultimately launch phones at competitive pricing. Additionally, it created employment opportunities, which will improve with time.

Only one recommendation is made to FBR and the PTA: find a way to exempt smartphones brought in for personal use as opposed to commercial use from taxation. Why? Because if one travels abroad or returns to Pakistan from abroad, he or she can bring a smartphone as a gift for someone in Pakistan. Now, PTA and FBR must find a way to know that particular handset is purchased for personal use without any commercial intent. Just look at these ridiculous taxes applied on the latest iPhone models, including iPhone 11, 12, 13 and 14 series. Thus, the ultimate objective of DIRBS can be attained without any obstacles for individual.