New Taxes on Telecom Sector to Debilitate Pakistan’s Growing IT Sector

The Federal government of Pakistan presented the fiscal budget 2022-23 on Friday and imposed a number of new taxes for stabilizing the economy. The government entails that the new budget is focusing on consolidation of the economy (to save the country from economic turmoil as recently witnessed in Srilanka) and to safeguard the most vulnerable segments of the society including lower-middle and middle-income classes. However, given the inflationary measures and imposition of taxes on fuel, electricity, telecom sector, etc, it seems like the budget is more prone to meet the demands of IMF rather than safeguarding the interest of citizens.

Simultaneously, the new budget imposes many new levies and taxes on the telecom sector and mobile phone industry, which are anticipated to stifle several development initiatives related to telephony, internet services, and mobile phone manufacturing.

Some of the new taxes imposed on the telecom sector in the new budget are mentioned below:

Increase in Regulatory Duty on optical fiber import:

The regulatory duty (RD) on optical fiber cable imports was hiked from 10% to 20% in the recently announced federal budget, with the main aim of promoting local manufacturing of the high-tech cables.

Increase in Taxes on CKD, SKD, and CBU Devices:

The government also imposed stringent levies on completely knocked down (CKD) devices, Semi Knocked Down (SKD) devices, and Completely Built Units (CBU). The sales tax on the import of completely knocked down (CKD) devices worth more than $100 has been ramped from Rs 10 per set to 10pc of their value. Simultaneously, the sales tax on completely and semi-knocked-down (SKD)  devices will be around  PKR 4,000 at the rate of 10% for phones worth $200 or more.

Increase in Taxes on Import of Mobile Phones:
The new budget has set a new sales tax of up to PKE 16,000 on the import of mobile devices. Now, we would break down the taxes for each price segment.

Mobile Devices worth $30:

For the mobile phone with a cost and freight (C&F) value of up to $30, there will be a levy of PKR 100 per set.

Mobile Devices worth $30 – $100:

For the mobile phones with a C&F value of $30 to $100, the levy rate per set will be PKR 200.

Mobile Devices worth $101 – $200:

For mobile phones with a C&F value between $101 and $200, the levy rate per set will be PKR 600.

Mobile Devices worth $201 – $350:

The sales tax per device for mobile phones with a C&F value of $201 to $350 will be PKR 1800.

Mobile Devices worth $351 – $500:

The sales tax on mobile phones having a C&F value between $351 and $500 will be PKR 4000.

Mobile Devices worth $501 – $700:

On mobile phones with a C&F value between $501 and $700, the sales tax per device will be PKR 8000.

Mobile Devices worth $701 or more:

The sales tax on mobile phones having a C&F value of above $701 will be PKR 16000.

If you want to import any new device, then you can find the exact tax from the link below:

Mobile Phones Taxes in Pakistan Calculator: PTA Mobile Taxes (2022)

Tech Experts & Industry Players Showing Concerns over the new taxes:

The tech experts and industry players from around the country have voiced concerns that the new tax measures would affect the development plans of the private sector as well as the government-led Universal Support Fund (USF) programs. In this regard, a senior official from Jazz Pakistan said,

There is a need for localization of all backend industry, including various kinds of cables, but manufacturing takes time and ongoing projects by all the IT and telecom companies to lay fiber-optic cable across the country will become costly.

The vice president of the All Pakistan Mobile Phones Association also expressed concerns over the new taxes imposed on mobile devices. He remarked,

This will encourage under-invoicing and imports of phone sets of up to $200.

Final Words:

The government of Pakistan must review these new taxes imposed on the telecom sector as they will have a debilitating effect and can slow the growth of the IT industry. In this rapidly transforming technology world, such measures aren’t healthy and would slow Pakistan’s overall progress.

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