Manufacturers: FBR for submitting relevant purchase prices applicable on laptops

The Federal Board of Revenue (FBR) Friday directed computer industry to provide purchase prices applicable for laptops from manufacturers in UAE before taking any decision on the proposal of fixed tax regime on computers in federal budget 2014-15. It is learnt that a delegation of Pakistan Computer Association (PCA) headed by Munwar Iqbal met FBR Chairman here on Friday at the FBR House to discuss budget proposals pertaining to the computer industry. Senior FBR Members and budget makers were also present.
During the meeting, the industry submitted a proposal to fix the duty on the import of computers up to Rs 3,000. FBR Chairman Tairq Bajwa was not against the idea of fix tax regime and assured them to examine the proposal in the light of input from budget makers and industry on the import data etc. However, tax authorities have asked the industry to submit relevant purchase prices applicable on laptops from manufacturers not only in Pakistan but in UAE as well.
The industry has carried out a detailed analysis and comparison of imports made by documented importers and informal sector for Ministry of Finance and the FBR. Through introduction of fixed tax regime in budget 2015-16, the broadening of tax-base as well as major increase in revenue collection would be witnessed. The industry is also willing to give assurance/guarantee for expected increase in revenue and documentation of all importers following fixation of tax rates on the import of said items. The fixation of tax rates at Rs 3000 on the import of laptops and desktops computers from 2015-16 would discourage the importers in informal sector to illegally import computers. The cost of smuggling would become higher as compared to the fixed rate of taxes at Rs 3000 for legal imports. Due to absence of incentive to smuggled computer apparatus, everyone would be happily ready to declare and pay Rs 3,000 fixed tax without by-passing the legal system of the FBR.
According to some estimates based on the market size, around 420,000 laptops at present are being imported annually and only 35 percent of these are imported legally. The annual revenue collection on these 147,000 laptops under legal import doesn't exceed Rs 1.146 billion. In contrast, if taxes are rationalised at a fix charge, the illegal business would lose its charm and would have to be part of legitimate business resulting Rs 819 million to become part of the tax revenue.
By presenting analysis of the price mechanism, the fixed tax of Rs 3,000 on laptops would certainly discourage smuggling and at the same time give low income groups affordability to buy expensive notebook. This win-win situation would result in a considerable increase in the revenue to the tune of Rs 1,260,000,000, he said. Similarly, if the government charges the same fixed tax of Rs 3000 on desktop computers, with a market capacity of 600,000 annually, it could get a huge amount of Rs 180,000,0000 in the tax net. This would remarkably increase the IT industry's share in the national economy.