PTA shares update on taxation of new and old iPhones in Pakistan

ISLAMABAD – A member of the Pakistan Telecommunication Authority (PTA) member stated that the Federal Board of Revenue (FBR) uses the International Mobile Equipment Identity (IMEI) number to identify mobile phones and that the existing system does not differentiate between new and old phones solely on the basis of IMEI when determining tax. He responded when Senate Standing Committee on Cabinet Secretariat Chairman Senator Rana Mahmoodul Hassan questioned the taxation of new and old iPhones, noting that the same tax treatment appeared to be applied to both. Senator Rana Mahmoodul Hassan observed that the Global System for Mobile Communications Association (GSMA) had warned that the existing tax structure could impede the successful rollout of 5G services in Pakistan The PTA member said, however, that Customs checks consignments of mobile phones arriving in containers and can determine during inspection whether the phones are new or used, and that the tax treatment applicable to new and old phones in such consignments differs accordingly. The PTA member further informed the committee that millions of mobile phones carrying fake IMEI numbers had been blocked. The committee subsequently received a detailed briefing from the Pakistan Telecommunication Authority, Federal Board of Revenue and Customs authorities on mobile phone registration, taxation and customs duties. A PTA member informed the committee that a mobile phone is registered as soon as it connects to Pakistan's network. He clarified that PTA does not impose taxes on mobile phones and that the FBR determines the applicable tax. FBR officials stated that the previous budget provided for a 20 percent reduction in customs duty every year and that customs duty on mobile phones would continue to decline by 20 percent annually until 2030. Officials explained that different valuation mechanisms exist for old and new mobile phones, while Customs authorities calculate the applicable taxes under Article 25 of the Customs Act. A fixed duty is prescribed for every phone and cannot be changed arbitrarily. The PTA member noted that locally assembled mobile phones are being produced in Pakistan; however, batteries and casings are not yet manufactured domestically. He stated that the Engineering Development Board is working on a new policy for the sector.