The Federal Board of Revenue (FBR) is reviewing a budget proposal of computer industry to fix import duties/taxes at Rs 3,000 on the import of laptop and desktop computers in the budget (2015-16) to generate additional revenue and provide an opportunity to informal importers to declare and get cleared imports assessed on fixed rates.
Munawar Iqbal, Chairman Pakistan Computer Association (PCA), presiding over a meeting of the Association here on Tuesday emphasised the need to rationalise the existing tax structure and generate additional revenue for the government. He said the PCA has carried out a detailed analysis and comparison of imports made by documented importers and informal sector for Ministry of Finance and the FBR. The working paper has provided an opportunity to the government to simultaneously achieve two objectives, ie, documentation of all importers in computer industry and secondly major jump in revenue collection from computer sector in 2015-16.
Through introduction of fixed tax regime in budget 2015-16, the broadening of tax-base as well as major increase in revenue collection would be witnessed. The industry is also willing to give assurance/guarantee for expected increase in revenue and documentation of all importers following fixation of tax rates on the import of said items, he added.
If the FBR Chairman Tariq Bajwa provides an opportunity to the computer vendors before budget, the industry would share detailed analysis for tax mangers and budget makers to enhance revenue and increase documentation of the computer vendors, he said. Moreover, smuggling would decline and revenue would rise by making a tax policy shift in case of computer industry, he said.
The fixation of tax rates at Rs 3000 on the import of laptops and desktops computers from 2015-16 would discourage the importers in informal sector to illegally import computers. The cost of smuggling would become higher as compared to the fixed rate of taxes at Rs 3000 for legal imports. Due to absence of incentive to smuggled computer apparatus, everyone would be happily ready to declare and pay Rs 3,000 fixed tax without by-passing the legal system of the FBR, he added. Besides, people belonging to the low-income group will be able to afford to buy a standard notebook.
Chairman PCA Munawar Iqbal said that according to some estimates based on the market size, around 420,000 laptops at present are being imported annually and only 35 percent of these are imported legally. The annual revenue collection on these 147,000 laptops under legal import doesn't exceed Rs 1.146 billion. In contrast, if taxes are rationalised at a fix charge, the illegal business would lose its charm and would have to be part of legitimate business resulting Rs 819 million to become part of the tax revenue.
By presenting analysis of the price mechanism, he said the fixed tax of Rs 3,000 on laptops would certainly discourage smuggling and at the same time give low income groups affordability to buy expensive notebook. This win-win situation would result in a considerable increase in the revenue to the tune of Rs 1,260,000,000, he said. Similarly, if the government charges the same fixed tax of Rs 3000 on desktop computers, with a market capacity of 600,000 annually, it could get a huge amount of Rs 180,000,0000 in the tax net, he added. This would remarkably increase the IT industry's share in the national economy, he added.
He said that the common consumer at present is forced to pay 30 percent additional price in the form of various taxes (17 percent GST; 3 percent advance tax, 6 percent income tax, 1 percent custom duty, up to 3 percent other miscellaneous charges) on computer and other accessories and thus have to resort to illegitimate business channels like buying smuggled items, he concluded.
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