IT products’ smuggling hurts fair competition, causes tax losses

ISLAMABAD: Smuggling of information technology products and irrational taxes on them are hurting the competition in local markets and resulting in multibillion rupees of losses to national exchequer, traders said on Saturday.   

IT traders said the Pakistan Computer Association (PCA) has presented various proposals to the government for stopping smuggling of IT products and rationalisation of tax/duties.

If implemented, the recommendations will document the sector, stop smuggling, provide a level-playing field to the legal businesses as well as boost the sector’s tax contribution to Rs5.37 billion a year from the existing less than Rs1.5 billion, they added.   

According to estimates, the incidences of cross border smuggling of IT products and other electronic goods are around $12 billion a year, putting the documented computer industry at a disadvantageous position as compared to illegal importers.

Huge smuggling of IT products are affecting local legal importers as well as eating up billions of rupees of government earnings.  

“We are asking the government to take actions against the smuggling of IT products and bring this sector in a legal ambit, want it to rationalise and uniform tax and duties on legal imports of these products and also eliminate illegal IT trade prices,” an association’s office bearer said.   “This will benefit the businesses as well increase tax revenue by manifolds.”  A PCA proposal demands a cut in import trade prices of IT products to increase the number of legitimate importers. 

Another proposal calls for review of the fixed valuation to define the duty and taxes on import of computer IT equipment to discourage smuggling and to facilitate legal imports. 

The computer imports bear one percent customs duty, 17 percent sales tax, six percent income tax and three percent additional sales tax. 

The traders said illegal importers are paying nothing, creating disparity between the legitimate importers and illegal importers.

The existing tax structure for IT products, including laptops and notebooks is causing increase in their prices as compared to smuggled substitutes.  Another proposal is related to the production of the Pakistan Telecommunication Authority (PTA) type approval certificate to customs officials for clearance of the government on every networking products. 

“It is for the FBR (Federal Board of Revenue) and PTA to clear the ambiguity about these products and define and specify their features to enable the importers to safely apply for the type approval equipment,” said the association. 

It sought withdrawal of PTA’s type approval to resolve this issue.

Another proposal touches the issue of implementation of the valuation guidelines for IT imports, which have higher values for clearance of consignments at the Karachi Port and cause delay in the clearance of the IT imports as well as loss of precious time. 

The association advised that all IT products should be brought under the full and final import settlement bill.

“Improvement in tax structure in the light of its proposals will enhance the IT business environment in the country for the mutual benefit of the IT business community and the FBR which will generate revenue for the national economy,” the association said.

A trader alleged that border custom authorities are collaborating with the smugglers to bring the smuggled goods into the country.

He called upon the authorities to take stringent measures and nab the smuggler mafia and put their names on exit control list to rectify the situation.   These smugglers are frequently traveling to other countries and carry products without paying taxes on them.

Earlier, the government announced to set up a border security force as per the recommendations of the Tax Reform Commission to prevent cross border smuggling. But, nothing has emerged as yet.   “The existing anti-smuggling force needs to be equipped with more personnel to strengthen its capacity to deal with the smuggling,” said the trader.