As you guys know that taxes have been going higher and higher since past year, Govt is doing everything to decrease the trade deficit which is resulting in decreased imports and even lower new investment. Investors have to give huge some of taxes to get there equipment imported which is much more than the return they are hoping to get from them.
The federal government made it mandatory for all international travelers to pay duty on smartphones brought into the country in June 2019. This Device Identification Registration and Blocking System (DIRBS) has paid the government a total of PKR 7bn in taxes over the past six months (1 Jan 2019 to 19 August 2019).
All of it Looks good from outside but there is a deeper truth about it, import tariffs on manufactured mobile phones include two sides of the coin. While the legal procedure has helped curtail illicit mobile trafficking, the exorbitant tax levied on the device has resulted in a significant decline in Pakistan's smartphone sales.The wider consequence of this downturn is that there has been a plummeting tax collected through data services.
How is this working? It's kind of easy. Rapid growth in mobile use over the last few years – for both legal and illegal devices – eventually led to higher government GST collection.
The federal government made it mandatory for all international travelers to pay duty on smartphones brought into the country in June 2019. This Device Identification Registration and Blocking System (DIRBS) has paid the government a total of PKR 7bn in taxes over the past six months (1 Jan 2019 to 19 August 2019).
All of it Looks good from outside but there is a deeper truth about it, import tariffs on manufactured mobile phones include two sides of the coin. While the legal procedure has helped curtail illicit mobile trafficking, the exorbitant tax levied on the device has resulted in a significant decline in Pakistan's smartphone sales.The wider consequence of this downturn is that there has been a plummeting tax collected through data services.
How is this working? It's kind of easy. Rapid growth in mobile use over the last few years – for both legal and illegal devices – eventually led to higher government GST collection.
With the implementation of a mandatory tax on all mobile devices, DIRBS could have made things worse when it comes to creating a virtual infrastructure in the state. Between 1 January and 19 August 2019, 1.2 million fewer phones and even fewer 4 G phones were imported.
Here are a few figures to help you understand why lower-end smartphones generate higher revenue: the ARPU (Average Revenue Per User) for a feature phone is around PKR 239, while the ARPU for 3G users is around PKR 370, rising to PKR 531 for a 4G user (these statistics include GST and WHT).
This is a clear illustration of a user being more likely to generate higher government taxes on a 3 G or 4G network.A huge number of used and fresh devices were introduced illegally into the country before DIRBS, increasing the entry barrier to 3G or 4G. Although this systemic mobile trafficking created nation harm–in terms of tax avoidance–during the time this paved the way for a lower smartphone uptake.
This has now been stopped because rates for smartphones have increased, mainly due to mandatory collection of taxes on each unit. Therefore, there has been a smaller collection of GST from the consumer, for whom a decent margin has jacked up the entry price into smartphones.
There is little doubt that DIRBS is a mechanism that has been beneficial to the country in particular for the purpose of blocking illegal or stolen telephones, but it proves counterproductive to impose exorbitant taxes and duties and collect them through this mechanism.
To make it relevant to the online world as a whole, we need to rethink the duty / taxation arrangement of mobile phones so that it supports all investors.
This is a clear illustration of a user being more likely to generate higher government taxes on a 3 G or 4G network.A huge number of used and fresh devices were introduced illegally into the country before DIRBS, increasing the entry barrier to 3G or 4G. Although this systemic mobile trafficking created nation harm–in terms of tax avoidance–during the time this paved the way for a lower smartphone uptake.
This has now been stopped because rates for smartphones have increased, mainly due to mandatory collection of taxes on each unit. Therefore, there has been a smaller collection of GST from the consumer, for whom a decent margin has jacked up the entry price into smartphones.
There is little doubt that DIRBS is a mechanism that has been beneficial to the country in particular for the purpose of blocking illegal or stolen telephones, but it proves counterproductive to impose exorbitant taxes and duties and collect them through this mechanism.
To make it relevant to the online world as a whole, we need to rethink the duty / taxation arrangement of mobile phones so that it supports all investors.
Hi I am Khawaja Awais, I am a Blogger and entrepreneur.
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