FBR- Federal Board of Revenue Pakistan is looking for new ways to collect tax on luxury items. One suggestion would be to control tax collection at the source for mobile phones sold in Pakistan.The caretaker government has targeted cell phone users in its first move to increase declining tax revenues, as it slapped up to Rs1,000 in sales tax on smart phones at the import stage says a report by The Express Tribune.
The Federal Board of Revenue (FBR) has estimated generation of at least Rs5 billion per annum through this measure.
The move came at a time when tax authorities are facing serious problems in meeting the annual collection target of Rs2.381 trillion. The decision is expected to help curbing increasing imports of luxury items, aimed at reducing the import bill due to declining foreign exchange reserves.
On Friday, the FBR issued a notification that has made it obligatory for importers to pay Rs500 in sales tax on basic cellular phones. On the import of smart phones that are described as ones having 4GB basic memory and a touch screen, the importer will pay Rs1,000 in sales tax at the import stage.
Earlier, the FBR was charging nominal sales tax at the activation stage, a practice that was abandoned years ago as no one goes to cellular companies to activate phones, FBR’s Member Inland Revenue Operations Raza Baqir said. He said now tax calculation will be made at the import stage, which will help recover dues.
According to the FBR’s notification, the import of satellite phones will also be subject to a similar rate of taxation. Cellular and satellite phones’ import is also subject to 5% income tax.
In a recent briefing to Prime Minister Mir Hazar Khan Khoso, the finance ministry had proposed measures to curb the import bill by levying taxes on luxury items.Pakistan is a big market for all types of smart phones, and the country spends millions of dollars per annum on import of cellular phones, particularly smart phones.
The officials added that similar measures are also expected in the coming months, aimed at boosting revenue collection.