The government’s proposal to levy an 18% tax on mobile phones in Pakistan has sparked significant concern among stakeholders. While the intent behind the tax is to augment revenue, there are growing apprehensions regarding its potential impact on mobile phone accessibility and the broader industry. Likewise, the industry experts caution that this measure would lead to an increase in mobile phone prices, disproportionately affecting individuals with lower incomes. For many Pakistanis, smartphones are not just communication devices but essential tools for their livelihoods. For instance, Bykea riders and gig economy workers heavily rely on affordable smartphones to sustain their incomes.
Moreover, the proposed tax could hinder new entrants from acquiring smartphones, potentially impeding their ability to work and earn. Presently, Pakistan locally assembles around 95% of its mobile phones, benefiting from zero tariffs on SKD and CKD units. However, high duties on raw materials have hindered the growth of the local mobile components industry. Introducing an 18% tax on SKD and CKD units could exacerbate these challenges, further constraining local manufacturers’ capacity to thrive and innovate.
The timing of this proposed tax is concerning as Pakistan is transitioning to higher technologies like 3G and 4G, while approximately 40% of mobile users still rely on 2G devices. This tax proposal could hinder this technological shift by making newer, more advanced phones less accessible to the average consumer.
Furthermore, the government already generates substantial revenue from SIM card taxes, indicating alternative avenues for income generation without imposing additional financial strain on consumers. Experts advocate for exploring these options instead of increasing mobile phone taxes, which are crucial for communication and economic engagement.
During a recent session with the Federal Board of Revenue (FBR), industry representatives urged the government to reconsider the proposed tariff adjustment. They cautioned that heightened tariffs might disrupt localization plans and jeopardize Pakistan’s mobile phone export objectives, essential for economic advancement.
In conclusion, while the government’s aim to enhance revenue through the new tax is understandable, it’s vital to consider the broader implications. Stakeholders are urging the government to reassess the proposal and develop a balanced approach that supports local manufacturing while ensuring smartphones remain affordable for the public. The resolution of this discourse will significantly shape the future of mobile phone affordability and technological progress in Pakistan.