Smartphone sales tax fails to remedy Pakistan’s under-invoicing challenge

A sales tax on smartphones and other electronics goods levied by Pakistan’s government with the aim of recouping losses of customs duty due to under-invoicing seems to have backfired.

Rather than generating more revenue, the new tax appears to have driven more electronic device sales onto the black market.

Stable prices

Prices of smartphones, laptops and other electronics are largely the same as they were before the tax was levied on them according to a recent market survey.

The government increased the rate of sales tax on smartphones by around US$5 per device with effect from 1 July 2016.

Finance minister Ishaq Dar said the move was meant to compensate for the revenue losses due to under-invoicing of high-end mobile phones.

Smuggling to blame

But some trade experts official reckon there will be no change in prices. “Almost 60 per cent of mobile phones available in retail outlets are smuggled,” a former official of the Karachi Electronic Dealers Association (KEDA) told local media.

Another former KEDA official told press that data on customs duty collected on mobile imports was very low, yet the market seemed to be awash with phones available at pre-tax increase prices.



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