The fixation of duties and taxes on the import of laptops would result in major increase in sales tax collection from existing Rs 400 million to projected Rs 1.08 billion at import stage following documented and legal imported of this item from 2016-2017.
According to the calculations done by the computer industry for the Federal Board of Revenue (FBR), the government is getting from the current component of the sales tax on laptops an amount of approximately Rs 400 million. If the proposed fixed duty formula is applied on the laptop, there would be a jump in sales tax collection upto Rs 1.08 billion. Presently, the FBR is losing estimated amount of sales tax of Rs 679 million per annum. The overall share of the sales tax from the imputation taxes on laptop comes to 60 per cent. A break up of the total taxes on each laptop revealed that 17 percent sales tax, advance tax 3 percent, income tax 6 percent and customs duty of 28 percent, resulting in total taxes of 28 percent.
According to Munawar Iqbal Chairman PCA, the proposal is a major revenue generation measure for 2016-17 if incorporated in the next budget. The fixation of duties and taxes would resolve three issues ie increase revenue collection from computer vendors, check smuggling of IT items and increase registration of the computer industry. The FBR can simultaneously achieve objective of increased revenue collection and controlling smuggling through the said budget proposal of the industry. If opportunity has been provided to the industry, it would dully explain the rationale and the actual impact of the budget proposal to the policy makers, Munawar added.
The proposal revealed that the federal budget (2016-17) is fast approaching and the government has asked the businessmen and trade bodies in the county to share their proposals with the concerned departments for consideration in the coming budget. The PCA would therefore like to take this opportunity to send its budget proposals on behalf of the IT business community and stakeholders for inclusion in the national budget.
The underlying objective is to propose measures to rationalise the tax structure, encourage documented economy, broaden tax base, curb smuggling and help flourish smooth and business friendly environment in the country. With this perspective in view, the PCA tends to submit a comprehensive data comprising list of a wide range of IT products with a view to help the government in its effort for accelerated revenue collection and socio-economic uplift. The PCA believes that levy of fixed duty on the listed items would yield a higher level of revenue to the government as compared to the present revenue collection on IT products.
To further support its proposals, the PCA would like to refer to the sale of Laptops in the market where an estimated 600000 laptops are being brought into the market annually, out of which 35% are imported legally and the rest of 65% are brought through illegal channels. The PCA proposes a fixed duty/tax of Rs 3000/- on each notebook which if applied per unit would yield a net amount of Rs 4.6billion annually to the government under a documented economy. In other words, the government would be losing a net amount of Rs 3.4billion, 65% of the total amount of Rs 4.6 billion against the present amount of Rs 1.6 billion in revenue on the notebook , if illegally imported laptops go unaccounted causing huge loss to the government:-
Firstly, establishment of a documented economy, a market, free of distortion: The proposed fixed duty, if accepted and accommodated in the budget 2016-2017 will bring about important changes in the IT sector. The proposal would broaden tax next with new taxpayers; encourage business transaction through the scheduled banks, curbing of smuggled IT products in the market; with buyers availing the documented business; creation of a smooth and business-friendly environment; and yielding greater revenue to the government, PCA added.