27 % Taxes on computers will discourages legal import. PCA

ISLAMABAD ( ABRAR MUSTAFA )

According to the budget proposals of the PCA to the FBR, the fixation of taxes on the import of computers and laptops would result in sudden jump in revenue collection within the existing taxation structure. The imposition of 17 percent general sales tax (GST), 3 percent value added tax, 5.5 percent income tax and 0.85 percent Sindh Excise Duty along with miscellaneous expenses of 0.65 percent result in overall taxes to the tune of 27 percent. This not only discourages imports of computers through legal channel but also result in low revenue collection from the computer industry. The fixed tax scheme for the computer vendors would result in increase in revenue collection in 2014-15.

 

Current Tax Structure on import of computers, general sales tax 17%; value added tax 3%;  income tax 5.5%; Sindh excise duty 0.85%; miscellaneous 0.65% and total 27%. The current tax structure revealed that the incidence of taxes is very high on the import of computers and fixation of taxes on each PC/laptop would give sudden jump to the revenue collection from the vendors and importers of computers. The data analysis revealed that the trend of revenue collection showing nominal increase in case existing arrangement continues in 2014-15. On the other hand, fixed tax scheme on the import of computers would encourage voluntary compliance and expand the tax base by encouraging documented imports.

 

Revenue collection from computer sector raveled that during 2011-12 Rs.102,600,000 sales tax; Rs.32,062,500 income tax was collected resulting in total collection of Rs.134,662,500. The size of PC Market of Pakistan was Rs.500,000 in 2011-12 and per unit revenue comes to Rs.269. Revenue collection from computer sector raveled that during 2011-12 Rs.189,500,000 sales tax; Rs.59,218,750 income tax was collected resulting in total collection of Rs.248,718,750. The size of PC Market of Pakistan was Rs.530,000 in 2011-12 and per unit revenue comes to Rs.469. Revenue collection from computer sector raveled that during 2011-12 Rs.189,500,000 sales tax; Rs.17,281,000 income tax was collected resulting in total collection of Rs.70,681,553. The size of PC Market of Pakistan was Rs.550,000 in 2011-12 and per unit revenue comes to Rs.128.

The proposed scenario of fix tax on computer reveled that  PC market size in fiscal 2014-15, would be 600,000 units; assuming 85% will be imported legally, 480,000 units; fixed tax on computers Rs.1,500; total revenue collection on computers Rs.765,000,000; revenue collected in 2012-13 Rs.248,718,750 and additional revenue collection Rs.516,281,250.

The data reflected that the fixed tax of Rs 1,500 per computer in federal budget 2014-15 would result in sudden jump in revenue collection during coming years.

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