The Federal Board of Revenue (FBR) has received proposals to restore facility of one duty-free handset in a calendar year under gift/personal baggage scheme and reduce tax slabs on all categories of mobile phones brought into the country to encourage penetration of smart phones.
The FBR has sought budget proposals for next fiscal year and telecom sector is also actively approaching the Board for consideration of the viable tax proposals and policy changes in the telecom sector specifically to deal with the negative implications of the Device Identification, Registration & Blocking System (DIRBS). Experts in one of the leading telecom company proposed that the government should devise a strategy/plan for depreciating the value of mobile handsets and revise the tax slabs accordingly as is the case of other imported items.
As per the Prime Minister's vision of facilitating expatriate Pakistanis, the government should reinstate one duty-free handset in a calendar year under gift/personal baggage scheme.
As more devices are registered, the government will be able to increase its pool of taxes. This will also curb the menace of street crimes in the country as the government will have enhanced availability of data regarding mobile phones.
Pakistan Telecom Authority (PTA) had enforced implementation of Device Identification, Registration & Blocking System (DIRBS) on all cellular mobile operators.
The DIRBS system is intended to verify, detect and discourage illegal, non-compliant, non-tax paid handsets and devices by authenticating currently active devices on cellular networks and ensuring continual monitoring as new devices are activated.
Before the introduction of DIRBS, handsets with valid and invalid IMEIs were brought into Pakistan through legal and grey channels. However, after 15 January, any handset brought into the country as baggage/gift needs to bear a valid IMEI and taxes have to be paid at the market price as per the specified slabs, the expert added.
Overseas Pakistani/foreign traveler residing in Pakistan for more than 180 days using Pakistani network SIM will have to pay all taxes related to their mobile handset.
After the implementation of DIRBS, many problems have surfaced, which include high taxation, negative impact on used handset retail industry and affordability of handsets/IOT devices by common Pakistani which is hampering Prime Minister's digital Pakistan vision.
The experts said that there are serious challenges which need to be addressed including problems for amnesty scheme holders. The government provided amnesty to many cell phone owners whose handsets were with invalid IMEIs; however, even after getting the amnesty they have been impacted gravely.
Business of second hand mobile phones has also tremendously declined because these phones can only work with registered SIMs thus without the registered SIM their value is zero. Resultantly, millions of retailers dealing in second hand mobile phones are experiencing slow growth of business
Second hand mobile phones were available at cheap rates; therefore, it was easier for a lower/middle class to buy them but now one is apprehensive about buying these phones because the IMEI number may be tampered or SIM might not work.
An average man belonging to a middle class family with a monthly income of Rs 15,000 - Rs 25,000 cannot buy a branded handset ranging from Rs 25,000 to Rs 50,000. On top of that if enhanced taxes have to be paid on the phone then they will be further discouraged. This has negatively impacted mobile phone growth in Pakistan. People are reluctant to buy new handsets due to such problems. Blocking of smart phones has eventually led to a slowdown in data/internet/digital adoption amongst mobile customers across industry.
The experts said the government should devise a strategy/plan for depreciated value of mobile handsets and revise the tax slabs accordingly as in the case of other imported items.
This was a standard practice even after DIRBS was launched and was a great help to expatriate Pakistanis especially from the lower middle class who work as labourers abroad as they would bring in their used handsets and gift it to their family members. This was discontinued due the lack of data protection within Government authorities as the travel data was being leaked to open market. The Government instead of resolving/fixing the issue imposed a total ban on this scheme.
The DIRBS has also led to the initiation of certain black market businesses which involve unblocking the blocked IMEIs through replacement. This has led to further problems for laymen of not knowing whether the second hand handset being sold is genuine or not. Moreover, genuine users with IMEI/identity theft face problems in proving that their IMEI is genuine and has been stolen.
The government plans to digitize processes in Pakistan, smart phones and IoT devices play an essential role in that regard but if people are not be able to afford smart phones or use them properly then how will they use digital services.
Blocking of smart phones has eventually led to a slowdown in data/internet/digital adoption amongst mobile customers across industry. Therefore, the government should reduce tax slabs on all categories mobile phones brought into the country to encourage, penetration of smart phones.
As more devices are registered, the government will be able to increase its pool of taxes. This will also curb the menace of street crimes in the country as government will have enhanced availability of data regarding mobile phones.
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