Comfortable Competition in Domestic Markets
Will tariffs on imported items, support the local industry or discourage innovation?
FBR recently released a circular elaborating on the enforcement of a 25% sales tax on imported mobile phones
The government announced its mini-budget worth PKR 170 Billion last month. In order to finance this budget, the Federal Board of Revenue has imposed various sales taxes on commodities ranging from necessary to ‘luxury’. The general sales tax has been raised from 17% to 18%, which suggests that the government aims to finance its fiscal deficit by targeting the poor.
The luxury items constitute varying commodities ranging from tissue papers to luxury aircraft. There is an inequality in the incidence of tax burden within luxury items as well. FBR recently released a circular elaborating on the enforcement of a 25% sales tax on imported mobile phones. Recently, Pakistan’s local manufacturing of mobile phones has improved quite a lot, leaving little room for imported mobile phones.
On the other hand, the teledensity in Pakistan has been improving too. Most of the country’s citizens use mobile phones to access information and digital services. However, the rise in freelancing and providing digital services has increased over the past couple of years. There is a gap for high-end mobile phone devices, in local markets, that can facilitate young people hoping to earn their bread through freelancing.
The establishment of further taxation on imported mobile phones is an unwelcome factor in promoting the growth of local industries. As we have observed in the case of automobile industries, high tariffs seldom work beyond a short-term solution to financing fiscal deficits.
⚫ Pakistanis have withdrawn PKR 161 Billion from banks since July 2022
⚫ The trend in the currency in circulation. The total CiC stands at PKR 7.8 Trillion as of December FY 2023
⚫ Rising inflation and contraction in currency have led to a demand for cash, resulting in heavy withdrawal
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The domestic market is competitive with the imported items in terms of numbers. But what about innovation?
Pakistan's teledensity owes its growth to the rise in mobile phones’ availability.
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