The Federal Board of Revenue has made a change in the personal baggage rules and as a result of that, overseas Pakistanis will now have to pay tax on every mobile phone they bring to the country.
Yes, you guessed that right. This is applicable even on your first or personal mobile phone, which was supposed to be exempt from Customs duties previously. The only exception is roaming. That is you don’t have to register your phone with the PTA nor pay any duty as long as you use your international SIM card and are on roaming. However, if you put local SIM into your mobile, you will have to register within 60 days.
The new rule, which came into effect on July 1, went largely unnoticed as only a small section of the press reported this development.
This change also explains why overseas Pakistanis, who had to pay tax after registering their first and only device with the PTA, have been expressing their frustration about this on social media. This is double taxation, they say, referring to their purchases on which they already pay taxes abroad.
Under the previous policy, overseas Pakistanis were allowed to bring one phone to Pakistan without paying any duties under the Personal Baggage Rule, but this exemption was removed following reports of misuse of the scheme. There were reports of people stealing passengers’ data to register imported phones so they could avoid paying taxes. This was happening at a large scale and was also reported by subscribers of SAMAA Digital on its social media pages.
To stop the misuse of this scheme, the government removed the exemption, a move that didn’t go down well with the overseas Pakistanis, who criticised it. Instead of stopping data theft, the government has deprived expats of this facility, they say.
The FBR couldn’t be reached for a comment, but an official familiar with the matter told SAMAA Digital that several arrests have been made in this regard in Karachi and Lahore. Immigration, travel agents and airlines all have passengers data. Who leaks data is difficult to find, he said. What items should be allowed under this scheme is the prerogative of the government, he added.
Overseas Pakistanis can still bring five phones per the calendar year, but now they have to pay duties on each.
By changing the rule, the government has closed another door for importers and traders of smuggled phones. The import of smuggled mobiles is in hundreds of thousands, which cost the government a lot as no taxes are paid on these mobile phones. All this at a time when the government is running a massive budget deficit (more than Rs3,000 billion) because of a low tax base– smuggled goods are one of the reasons for low tax revenue.
To deal with this, the PTA and the FBR warned traders and buyers that they would block all smuggled phones that weren’t registered by January 15. The government ran an awareness campaign for months, asking consumers already in possession of such phones to register their devices before the deadline. The PTA says it didn’t block their phones nor charge any tax. However, people owning any phones that were bought or switched on after this deadline were given two months to register and pay taxes and were blocked if they failed to comply.
Mass blocking of smuggled phones by the PTA led to panic among both traders and consumers. Traders started negotiations with the FBR but could not reach any agreement. Last week, traders of mobile phones went on a shutter down strike in protest.
On this issue, SAMAA Digital asked the traders to clarify some queries.
Disputed tax rates, who to believe?
The FBR chairperson wants tax worth Rs20,000 to be imposed on a device, traders, however, say they should be charged no more than Rs400. Here is one possible explanation for that: the FBR system generates tax payment receipt electronically by using your device’s international mobile equipment identity (IMEI). In case of a smuggled phone, the IMEI number can be fake or modified. For example, you may have bought a Rs4,000 phone but the IMEI number it carries is of Samsung Note 7. The system will generate tax receipt based on the IMEI number and assume it is Note 9 thus you may end up paying Rs40,000 or even higher tax on your handset.
Talking about this issue, Muhammad Rizwan, who is the president of Karachi Electronics Dealers Association, the body representing mobile phone traders on the discussion forum, said the government can block such IMEIs, but they should consider devices with a genuine IMEI number because it is not necessary that it is tampered with in all smuggled devices. A genuine IMEI number can be verified on the Global System for Mobile Communications’ (GSMA) website.
You (traders) don’t seem to pay due taxes as evident from the statement of FBR chairperson. Is this true?
“This is not correct,” Rizwan said.
He explained that the traders Rs400 demand was for a device worth Rs2,000, and not for the ones that cost Rs20,000 as stated by the FBR chairperson. “We want to pay tax and come under the tax net,” he said.
Why haven’t you stopped selling smuggled phones?
This was the job of Customs to stop smuggling. If they did it, traders would automatically shift to legal imports, he claimed.
Secondly, they have been blocking mobile devices based on the January 15 deadline, but the related SRO (government directive) was issued in May, which doesn’t make sense, Rizwan said. If they issued the directive earlier, it would’ve saved all of us from the mess we are in. About half of our shops are shut already and many people have lost their jobs.
Why sell smuggled phones in the first place?
They are cheap and people can’t afford to pay Rs40,000 for a reliable smartphone, but they are happy to buy the second-hand (used) version of the same phone for Rs15,000, Rizwan explained. As per traders’ estimates, 80% users in the market like to buy a second-hand phone.
There are no two opinions about the unlimited benefits of smartphone technology. By taxing these devices, you make them expensive thus deprive the poor of using the latest technology. Besides, we are open to paying taxes and want to come under the tax net, he said.
What to do with the blocked phones?
The people whose mobile phones have been blocked can get it unblocked online at PTA’s website or by visiting either PTA or FBR offices. Both these options are available for those physically present in Pakistan.
What to do if you want to buy a used/smuggled phone?
Before making the payment, check the device’s IMEI number and send it to 8484. If its status is PTA comply, buy it. If it shows non-compliant, you have two options: don’t buy or check the amount of tax you will need to pay after purchasing it.
You can register the device at PTA’s website and the system will generate a tax slip, this will tell you how much you pay in total.
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