Increasing tax on imported mobile phones has become the issue of most discussion in Pakistan. The government has raised the tax ratio a number of times over the last few years, primarily to contribute to the local economy and decrease the import bill. But now, these high taxes have begun to impact the consumer, retailers as well as the entire smart phone market. Mobile phones are now a necessity and once the price of the phones goes out of the ordinary, it causes frustration and anxiety among the users. This article explains why these taxes were introduced, how they are affecting buyers, and what the future of mobile phone affordability in Pakistan may look like.
Why the Government Imposed Heavy Taxes
Pakistan is also experiencing an economic problem particularly increasing import bill and a weak currency. A significant part of this import bill is made up of the electronics and mobile phones have ever been among the highest imported products. To check this, the government came up with harsh tax rates in all imported smartphones. The biggest factor was to cut down on unnecessary luxury imports, push people towards assembling mobile phones locally, and inject more income into the national treasury.
Another reason why the government feels that increasing taxes will make international brands begin assembling their gadgets locally is because the government believes that such an action will lead to the creation of employment to the locals. This will help boost employment, enhance local production and curb flow of dollars. Whereas this policy has resulted in certain positive moves by companies such as Samsung, Xiaomi and Tecno, the effects on the consumers have been severely difficult to implement.
The Impact on Smartphone Prices
The biggest implication of high taxes is the excessive mobile phone price hike. A mobile phone worth 300 dollars in a foreign country would not fail to surpass PKR 120,000 or so, including tax in Pakistan. Even cheaper and middle-end solutions (which were previously priced in PKR 20,000-PKR 40,000 bracket) are currently out of reach of a large number of the population.
The Device Identification, Registration and Blocking System (DIRBS) further facilitates that all imported phones are registered by payment of PTA tax to use it on Pakistani networks. Though the system helps check smuggling, it also increases cost by a big margin to the end user. Even people who travel abroad experience the pressure since additional mobile phone so necessarily is accompanied by huge PTA bills.
These taxes have increased the upgrade cycle of smartphones. Consumers are making an attempt to use the current phone between the span of two and three years before purchasing a new one. This change has stagnated the general smart phone market and decreased the sales of the retailers.
The Effect on Retailers and the Market
One of the sectors that have been hit the most by high taxes on imports is the retailer. Most of the store owners complain that their sales have been reduced drastically. Customers are going to shops, inquiring about prices, and become shocked and walk out without making any purchase. The high-end devices in particular have been hard to sell as the end up charging twice as compared to other nations.
Consequently, there are retailers that are considering used or refurbished phones. The second-hand mobile market in Pakistan is also expanding rapidly since the users are no longer willing to purchase new devices, which are costly but opt to purchase cheaper alternatives. Pakistan, Karachi Saddar, Lahore Hafeez Center, and Rawalpindi Saddar have turned into full of used phones and the market is growing.
Nonetheless, such issues with battery, no warranty, counterfeits, and unpredictable PTA status are also presented in used phones. Nevertheless, the customers would rather take these risks than paying a very high price of new smart phones.
Impact on Students, Freelancers & Digital Work
Smartphones are not devices of entertainment anymore. Online classes require their use by the students, freelancers in their work, and small business owners in their marketing and sales. When the prices of phones go up it has a direct impact on productivity, learning and earning opportunities.
Most students who used to easily purchase mid-range devices are now finding it hard to purchase even ordinary smartphones. Verification, communication and daily tasks also require reliable devices of freelancers working on the platforms of Fiverr and Upwork. The high tax has resulted in them finding it difficult to upgrade their devices to better ones that can bring about better work quality
On the same note, small business owners are also dependent on mobile phones to make online payments, as well as promotion and communication with customers in social media. High cost smartphones decelerate their online development and reduce their competitive capabilities on the internet.
Are Local Assembly Plants Helping?
In Pakistan there is a certainly increased number of local assembly plants. Other brands such as Samsung, Infinix, Tecno, Vivo and Xiaomi have begun assembling a large variety of phones in-country. This is to help cut down cost and ensure that smartphones are affordable.
Nevertheless, locally assembled models are still not very cheap because the government also taxes the imported parts used in the assembly process. In spite of the fact that the final price will be lower than completely imported phones, the final price will still be higher than the prices in other countries.
The domestic manufacturing sector is yet to become developed. It will be long before these companies will be able to manufacture sufficient devices to reduce prices. Before that, the consumers still have to pay taxes.
Public Reaction to Increasing Taxes
There has been a powerful response by the people. The social media trends tend to point out the frustrations of users. According to many people, mobile phones are not luxurious items no longer and they should not be taxed in such a way. Some people are of the view that the government ought to develop special tax relief measures on students, freelancers and low-income users.
Expatriates also complain of high taxes in PTA that causes the impossibility of carrying even a single phone to use at personal level. Most users are not even registering their phones and are making use of temporary or unofficial solutions, which may lead to problems in the long run.
Are Tax Rates Going to Go Down in the Future?
There is still debate about whether the government will cut mobile phone taxes in the next few years. Some industry analysts believe the government will eventually reduce these taxes once the economic situation becomes stable and local production plants reach their full capacity.
But there are those who believe that the taxes might not go down or rather tax rates may go higher. As long as the country is still under economic strain. At the moment, we can assume that smartphone prices will remain high unless the government announces a significant policy change.
How Users Are Adapting to the Situation
Pakistanis have gradually learned to adapt to the new pricing environment. The popular trends are some:
- People like second-hand or second box phones as they are less expensive.
- Citizens are more dependent on the low-end brands such as Infinix, Tecno and Itel.
- Before making their choices, buyers compare the prices of PTA and non-PTA.
- During sales, more people purchase the phones in order to save on the money.
- Consumers re-use the old phones rather than buying new ones.
These changes indicate the extent to which high taxes have affected the lives of people.
Conclusion
The strict importation tax on the cell phone phones has caused significant changes in the smartphone market in Pakistan. Although the government implemented these taxes to reduce imports and encourage local production. They have still increased the overall cost for consumers. The abrupt increase in the prices of smartphones has caused a strain to consumers. Students, freelancers and retailers.
Smartphones are indispensable in communication, learning and earning online. Once they become excessive it touches upon all sectors of the society. Unless the government re-evaluates these tax policies or increases local production, the market will still experience a challenge. The consumers desire cheapness, and most of them wish. That one day they would be able to buy a smartphone without the intense pressure of paying taxes.