Mobile makers seek tax reform to boost accessories production

ISLAMABAD: The mobile manufacturers have expressed confidence that the new government will streamline a key loophole in the taxation system to promote the local assembly of mobile phone accessories in the country.

They have pointed out that this lacuna currently permits the import of finished products at zero rates while imposing heavy taxes on raw materials.

The Pakistan Mobile Phone Manufacturers Association (PMPMA) wrote a letter to the Engineering Development Board (EDB), asserting that the current taxation regime restricts the local assembly of mobile phone accessories in the country. They emphasised the need for a cascading tariff on mobile phone accessories.

A senior member of the association told Dawn that due to this mismatched taxation regime, there is currently no assembly plant for mobile accessories in the country. The matter is expected to be resolved by the new decision-makers taking charge in the coming days, he added.

Currently, key mobile phone accessories, including chargers, batteries, cables, and packaging, enjoy zero-rated imports.

However, local assembly of these accessories becomes more than 50 per cent costlier compared to imported ones, with 20pc customs duty on raw materials, along with 18pc sales tax and 5.5pc income tax at the import stage.

Amir Allahwala, vice chairman of PMPMA, stated that around 10pc is the average assembly and finishing cost, including energy, workspace charges, human cost, etc.

“Therefore, the best option for mobile assemblers is to import all accessories in finished form,” Mr Allahwala said.

He added that local assembly requires not only massive investments but also long-term planning.

“That is what we are negotiating with the government — not only the reversal of the current policy but also it has to be on a long-term basis,” he added.

Currently, over 30 local mobile phone assemblers produce around 2.5 million sets per month, translating to a demand for up to 30m chargers annually.