ISLAMABAD: A new report released by the PRIME Institute reveals that the import of mobile phones is rising in Pakistan, going up from $500 million to $1.75 billion in recent years.
During the two-day Taxpayer Alliance conference held in Islamabad on Saturday, the PRIME Institute recommended harmonising the GST rate of 18 per cent on the import of mobile devices.
Currently, mobile phones imported into Pakistan face a tiered sales tax regime: 18pc on device’s valued up to $500, and a punitive 25pc on devices exceeding $500. While the policy intends to discourage luxury imports and protect local assemblers, its consequences have been counterproductive, including grey market expansion resulting in revenue leakage and consumer penalty.
In the Eighth Schedule of the Sales Tax, 1990 the differential rate of sales tax on imported mobiles, depending on the value, should be omitted. Harmonized 18pc sales tax should be applicable on imports of CBU devices, irrespective of their value, the report added.
Unconditional tax concessions to local assemblers have created rent-seeking behaviour without corresponding benefits to the economy. To shift from low-value assembly to true industrial capability, the government must implement a performance-based incentive framework, tied to measurable outcomes.
Learning from India and Vietnam, Pakistan’s tariff rationalisation must go beyond favouring CKD/SKD imports. Instead, it should introduce gradual duty restructuring where CKD/SKD imports that do not meet a minimum localisation threshold attract higher tariffs. Tax incentives and fiscal support must require formal partnerships with global OEMs that include 1) Establishment of local R&D labs, 2) Deployment of technical experts for knowledge sharing, and 3) Licensing arrangements that gradually localise key modules.
