ISLAMABAD: Mobile phone manufacturers are optimistic about the upcoming government’s will to rectify key shortcomings in the taxation system. As per them, the system currently allows imports of finished products at zero-rate while imposing heavy taxes on raw materials.
The Pakistan Mobile Phone Manufacturers Association (PMPMA) has penned a letter to the Engineering Development Board (EDB), highlighting that the current taxation regime is impeding the local assembly of mobile phone accessories in the country. They advocate for a cascading tariff structure for mobile phone accessories.
An official of the Association stated that the existing taxation system has deterred the establishment of assembly plants for mobile accessories domestically. However, with new decision-makers expected to assume office soon, the matter is anticipated to be addressed.
Presently, the import of key mobile phone accessories such as chargers, batteries, cables, and packaging are zero-rated. However, local assembly of these accessories becomes over 50 percent costlier compared to imports due to a 20 percent customs duty on raw materials, along with 18 percent sales tax and 5.5 percent income tax at the import stage.
Amir Allahwala, Vice Chairman of PMPMA, noted that the average assembly and finishing cost is around 10 percent of the total, encompassing energy costs, workspace charges, and labor expenses. Consequently, mobile assemblers find it more economical to import accessories in finished form.
He emphasized the need for a reversal of the current policy on a long-term basis, highlighting the substantial investments and long-term planning required for local assembly.
Presently, over 30 local mobile phone assemblers produce around 2.5 million sets per month, translating to a demand for up to 30 million chargers annually. Market estimates suggest that between 50-60 million mobile phone chargers are sold, with a similar demand for cables, totaling the local demand to around 100 million sets.
Muzafar Paracha, Senior Vice Chairman of PMPMA, emphasized the significant business potential in the sale of chargers and cables, highlighting the need for substantial investments to meet the annual demand of 100 million chargers.
The concerns raised by PMPMA to the EDB will be forwarded to the National Tariff Commission (NTC), eventually reaching the Federal Board of Revenue (FBR) for changes in the tax structure. This reform is expected to ensure the availability of quality chargers, cables, and batteries in Pakistan, ultimately enhancing sector standards.
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