Newly Proposed Mobile Phone Taxes Worries Industry and Users

The government of Pakistan plans to introduce an 18% tax on Semi-Knocked Down (SKD) and Completely Knocked Down (CKD) mobile phone units. The mobile phone industry and users are concerned about the new tax proposal. Currently, Pakistan assembles around 95% of mobile phones locally due to zero tariffs on SKD and CKD units. However, high duties on raw materials have stunted the development of the local mobile components industry.

Local production vs imports
Source: PTA

Impact on Mobile Phone Prices and Users

The Pakistan Mobile Phone Manufacturing Association (PMPMA) strongly opposes the newly proposed tax. They argue that it will make mobile phones more expensive, hurting people, especially those with low incomes. For instance, Bykea riders use smartphones to earn a living, so if phone prices go up, it could become harder for a new individual to purchase a smartphone.

Additionally, this tax could slow down the country’s shift to high technology like 3G and 4G. Currently, around 40% of mobile users in Pakistan still use 2G phones. In developed countries, 70-80% of people use 3G, 4G, or 5G phones. Therefore, Pakistan needs to make efforts to upgrade its technology, but higher taxes might make it difficult for people to afford newer phones.

total mobile devices in Pakistan
Source: PTA

Besides the proposed tax increase, the government still collects a good amount of money from taxes on SIM cards. This means there are other ways to generate revenue without making mobile phones too expensive for the average person.

PMPMA Meeting with FBR:

PMPMA also held a meeting with the Federal Board of Revenue (FBR) and urged them to honor government commitments to investors and avoid raising tariffs on mobile phones. The association warned that higher tariffs would disrupt localization plans and damage Pakistan’s mobile phone export targets.

Conclusively, while the government wants to increase its revenue with this new tax, it should think about the overall impact. The PMPMA urges the government to rethink the plan and find a way to support local manufacturing without making smartphones too costly for the public.

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