Buying a smuggled or used mobile phone will continue to be a risky business as mobile phone traders and the Federal Board of Revenue (FBR) disagree over what should be the justified rate of tax on these devices.
“If tax on a mobile phone is Rs20,000, the traders are demanding we tax [the same device] Rs400, which is not acceptable,” FBR’s Chairperson Shabbar Zaidi told a press conference on Friday.
This simply means if you buy a used or second hand mobile phone either from a trader or any other user, it will be at your own risk. This is because if turns out to be a device on which no taxes were paid, it is smuggled and will be blocked within two months of switching it on your network.
The import of smuggled mobiles is in hundreds of thousands, which cost the government dearly 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 Pakistan Telecommunication Authority and FBR warned traders and buyers that they would block all smuggled phones that failed to register with the PTA by January 15. The government ran a months-long awareness campaign, asking consumers already in possession of such phones to register their devices before the deadline. The PTA didn’t block their phones nor did it charge any taxes. However, 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 in both consumers and the trading community. Traders started negotiations with the FBR but weren’t able to reach an agreement.
The chairperson also said mobile phone traders have nothing to with the CNIC condition and are misleading people by linking their problem to it. He was referring to a sales tax law, which requires traders who purchase supplies or make sales of Rs50,000 or more to produce their CNICs while making the transaction so they could be registered with the FBR and brought under the tax net.
Traders have announced a shutter down strike from July 13 but we had the following questions for them:
You (traders) don’t seem to pay due taxes as evident from the statement of the FBR chairperson?
“This is not correct,” says Muhammad Rizwan who is president of the Karachi Electronics Dealers Association, the body representing mobile phone traders on the discussion forum.
Rizwan told SAMAA Digital that the Rs400 demand was for a device worth Rs2,000, not the one that value at Rs20,000 as stated by the FBR chairperson.”
We want to pay tax and come under the tax net,” he said.
Disputed tax rates, who to believe?
The FBR chairperson wants Rs20,000 tax on a device traders say should be charged at no more than Rs400. Here is one possible explanation for that: the FBR system generates tax payment receipts 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 a Samsung Note 7. The system will generate tax receipt based IMEI number and assume it is a Note 9 thus you may end up paying Rs40,000 or even more tax on your handset.
Talking about this issue, Rizwan said the government can block such IMEIs, but they should consider devices with genuine IMEI numbers because not all smuggled device have tampered IMEI numbers. A genuine IMEI number can be verified the Global System for Mobile Communications website.
But why did you not stop dealing in smuggled phones?
It is Customs’ job to stop smuggling. If they did it, traders would automatically shift to legal imports.
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. If they issued the directive earlier, it would save all of us from the mess we are in. About half of our shops are shut already and many people have lost their jobs.
But why sell smuggled phone in the first place?
They are cheap; people can’t afford to pay Rs40,000 for a reliable smartphone, but they are happy to buy the second-hand (used) versions of the same phone for Rs15,000. As per traders’ estimates, 80% users in the market like to buy second-hand phones.
There are no two opinions about the unlimited benefits of smartphone technology. By taxing these devices, you make them expensive thus depriving the poor of using the latest technology. Besides, we are open to paying taxes and want to come under the tax net.
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 the 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 payment, check the device’s IMEI number and send it to 8484. If its status is PTA compliant, 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 you have bought 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.