So before we steer ahead and begin to explain why we as tech enthusiasts do not understand the logic and the rationale behind a policy that will only cause inconvenience for everyone as well as affect the country economically – “sigh”; let’s do a quick recap and understand how this tax came into being and what it entails, shall we……
Here’s how somewhat of an honest idea, turned into a terrible reform
Back in 2018 Pakistan Telecommunication Authority introduced a legal framework namely the Device Identification Registration and Blocking System (DIRBS). This was primarily done to bring the entire locally used mobile phone chain into a net in an effort to reduce risks concerning the illegal use of mobile devices in Pakistan. This included introducing strict processes and checks on imported mobile phones in Pakistan as well as to halt the illegal smuggling practices of bringing mobile phones into the country.
The registration process of mobile phones would mean that the PTA would have absolute control and authority to detect and block stolen phones and prevent any attempts of them being sold in black markets.
This does not end here – furthermore, in March 2020, PTA announced that only 5 phones per person can be imported under the approval process into Pakistan within a single year. Upon reaching the airport, the individual must register the phones with PTA through the customs counter present or apply online. Be it national or foreign tourists, any individual that intends to use a local sim on the imported phone for more than 60 days will need to get it registered.
The registration application is submitted it is for PTA to review whether the phone meets the compliance standards or not. Once approved you will be issued a Certificate of Compliance (COC) also auto-generating a Payment Slip ID (PSID) along with the payment of taxes/duty applicable on your phone.
Since PTA was having way more fun alone – FBR decided to join the party
Well, now that the Federal Board of Revenue (FBR) has decided to join the party their contribution of primarily 6 different slabs as duties and taxes on the import of mobile phones.
The regulatory duty on a mobile device 30$ or more will be charged Rs300 per device. Simultaneously, a user will be liable to pay Rs31,520 on the import of mobile phones that are worth $500 per set or more as reported on FBR’s website.
The following snippet has been updated to reflect tax changes for
2021 2022, please refer to PTA website for the latest information.
The 6 different slabs liable on new smartphones:
- Upto $ 30 –
Rs 300Increased To Rs 550
- Above $ 30 and up to $100 –
Rs 2,940Increased To Rs 4,323
- Above $ 100 and up to $200 –
Rs 4,510Increased To Rs 11,561
- Above $ 200 and up to $350 –
Rs 6,180Increased To Rs 14,661 + 17% ST
- Above $ 350 and up to $500 –
Rs 17,650Increased To Rs 23,420 + 17% ST
- Above $ 500 –
Rs 31,520Increased To Rs 37,007 + 17% ST
So in case, you were looking forward to your family, relative, or friend gifting you an iPhone 12 please remember to pay the Rs30k+taxes if you aim to use the phone with a functional sim card.
Why is this bad for the market?
The number of imported mobile phones sets brought into Pakistan dropped from 1.033m mobile sets imported last year to 0.727 million between July to Jan 2021 as reported in Dawn NewsDawn News
Let’s start with the mere fact that there are still specific brands of mobile phones that have not been approved by the PTA. This means if you have a different brand phone or a copy of an original phone, that is not authorized and recognized by the PTA, your phone will automatically be blocked after 60 days.
So in short PTA expects you to purchase only those phones that they certify as registered phones for your use in Pakistan. This hinders new smartphone manufacturers from entering the market easily.
Now when concerning ourselves with taxes, please note that the tax imposed will be based on the make, model, and price of the mobile phone device being imported in Pakistan so you can be charged between PKR 300 to PKR 32,000+Registration for you to be able to use the phone.
On what grounds can your mobile phone be blocked by the PTA? The factors include:
- A model that has not been approved, recognized and authorized by the PTA
- A copy of an original phone
- Not registering mobile phone sets upon arrival to Pakistan within 60 days
So what happens to the phones that have been blocked by the PTA? Well, the blocked or blacklisted phone sets cannot be used with Pakistani sims anymore.
Extra regulations kill a market; a country like Pakistan, where innovation is still not at the forefront – we should be welcoming innovation, not regulating it. It is already sad to see the lack of official presence of many tech brands in Pakistan, with rules like this; the numbers grow even more. Brands require safety and security when entering a new market. Pakistan in recent years has seen a steady decline of tech brands doing business officially unless you are the friendly neighbourhood northerners – more on that in a bit.
The PTA had nearly blocked 3 million smartphones till 2019. This will definitely have adverse effects on the market and the economy in general. With Pakistan already facing barriers to bring about sustainable development, these measures will not just affect the smartphone industry as discussed above but also slow down the technological development and pace of innovation in Pakistan.
What’s the biggest impact of PTA Tax?
We highly believe in the freedom of choice when it comes to buying a product. With the massive rise in demand recently due to remote work under Covid circumstances; the used market has often become the source of ownership when considering new buyers.
Buying a used laptop or smartphone can be a big challenge in countries like Pakistan, where there aren’t any regulatory bodies to monitor or help consumers in the market. Everything is based on trust; which isn’t to say much.
Talking about smartphones, buying a used smartphone could be an ordeal already. Scammers in this industry are already famous and now the consumer who is short on cash already has to worry about PTA approvals. Not to mention the fact that the approval process is not bulletproof itself either.
Being in the business of IT retail and services, we personally have experienced many cases where a smartphone would be PTA approved for a while and several months later, it will be blocked again. This can happen due to several reasons, but being Pakistan the biggest one is the misuse of credentials. People visiting Pakistan have their credentials stolen (Passport Details), which then are used to generate discounted PTA tax invoices for local buyers. When the system catches these stolen credentials on a later date, the device is blocked again; by then it is often too late for the end-user.
People are scared to buy a used phone nowadays, the unreliability of the PTA approval process along with the fact that there are just too many scams in this market; leads us to believe that the approach needs to be improved.
The TinFoil Hat Theory: PTA Tax and China
We are tech enthusiasts at SK NEXUS, whenever we see good tech, we appreciate it. So touching on one more thing before we end this piece; is the fact that the Asian/Chinese Smartphone manufacturers seem to be immune to this PTA Tax. Now we are not ones to say that they aren’t paying taxes, but judging from the international sticker price in USD it does seem that way. A detailed comparison for this assumption can be made at a later date. But it suffices to say for now that; if you buy a flagship Apple or Samsung smartphone, you will be paying the full ~31,000-45,000 PKR tax even if the device is not the latest model.
On the other hand, the Chinese brand phones seem to have their pricing the same as the international market. The same assumptions could even be made in the automotive market. The rainfall of recent crossover releases is indeed impressive but do question one thing, how is MG (a Chinese brand) able to showcase their vehicle having a turbo-powered engine while other brands such as Kia or Hyundai have failed to do so at a similar price point for their products. This is also confirmed by the fact that MG was in taxation troubles recently. This is not to say that Chinese products are bad in anyway, they are indeed very good products for their price and even compete head to head within the industry. The question is only about their pricing strategies.
To wrap this up, the intent behind the reform to stop the smuggling of mobile phones while reducing the impact of black markets is a good initiative. But from helping the country clean its smartphone market, PTA tax has just become another source of grabbing tax from ones who can pay and causing issues for those who cannot.
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Experienced and energetic marketing specialist with over 7 years of experience – Khayyam loves to share his thoughts on startups, disruptive innovation, and whatever piques his interest.