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Sky rocketing phone prices despite import tax exemption

The duty tax was exempted on the import of mobile phones in January2020 to benefit citizens

Yeshey Lhadon

The consumers are complaining of eye-watering prices of smart phones. The duty tax was exempted on the import of mobile phones in January 2020 to benefit the citizens. And smartphones have become an integral part of our daily lives with the country pacing up with digitalization.

“We expected mobile phone prices to drop since the importers need not pay tax but it seems like tax exemption benefitted the mobile dealers more than the general public,” said a customer.

The Department of Revenue and Customs (DRC) did away with 20 per cent customs duty and 10 per cent sales tax for mobile importers. The government did so to ease financial burden on low-income earners with children attending online classes during the pandemic.

Although the government classified mobile phones as an essential item, going by the cost of mobile phones, it is still considered a consumer luxury today. The covid-19 pandemic has made smart phones a lifeline for users, particularly during lockdowns and isolation, giving internet access, using for remote learning and contract tracing of Covid-19 patients.

Mobile phone manufacturers also lowered the prices due to weak global smartphone sales for the last three years. Globally, the sales of mobile phones  plummeted by 20 per cent.

Before the tax exemption, most of the mobile dealers imported phones from India paying 10 per cent tax rather than importing from abroad paying 30 per cent tax. Today, most of the importers buy bulk of mobile phones from abroad like Dubai, USA, Australia, Hongkong, China, Singapore and Qatar paying zero tax.

However, the price remains too expensive and people in the low income bracket suffer from digital inequalities.

The head DRC, Yeshey Seldon claimed that earlier with 30 per cent customs tax and duty, the latest Iphone series would cost no more than Nu 100,000. She said, “Now that duty and tax is zero per cent, the price has to come down but DRC doesn’t regulate market pricing.”

Similarly, one consumer said that the price of smart phones should be lesser than what they get from India because India imposes 18 per cent Goods and Sales Tax (GST) or the prices should be at par with countries like Qatar and Hongkong.

“Of course the mobile phone dealers should set a profit margin but some dealers make more than 40 per cent profit. I bought the latest Iphone 13 pro max with memory capacity of 512 GB paying Nu 160,000 from one of the stores in Thimphu. But later when I compared the price in US, I felt stupid as it was easily available at 1400USD which would be like Nu 112,000,” said the consumer.

The market survey showed that the latest high-end smart phone Iphone 13 pro max costs between Nu 150,000 to Nu 160,000 in different phone shops in Thimphu. Whereas the same phone side by side with same specs and materials, the price of phones in Bhutan is comparatively high.

Qatar is one such country with zero tax on mobile phone imports. The phones which cost up to Nu 160,000 would cost 5600 QAED (Qatari Riyal) equivalent to Nu 122,000 in Bhutan, considering the logistic charges.

Likewise, the Indian made mobile phone, Poco X4 pro 5G with memory capacity of 128 GB costs Rs 20,000 in India but Bhutanese mobile dealers sell the same product for almost Nu 30,000 in Bhutan.

Statcounter is a web analytics service data that showed that 37.38 per cent of Bhutanese use vivo phones, 32.52 per cent are into Samsung, 14.12 per cent with iPhones, 6.41 per cent use Xiaomi, 4.06 per cent have Oppo and 3.05 per cent use realme brands.

When DRC was asked if there’s any plan to re-introduce taxation on import of mobile phones as the general public are not benefited like they should have, the Customs head said, “It depends on the government policy and economic situation of the country.”

DRC claimed that it doesnโ€™t have the report on the source of import of phones and prices declared. “I think consumer protection must be looked into,” said the head of DRC.

Importers need to declare the import products at the point of entry (POE). As long as an individual imports the phones for commercial purpose, one must declare it to customs even when the tax is zero. The DRC head claimed that declaration prices won’t be realistic. She said, “Everybody knows that under declaration, under-valuation, and non-declaration is practiced rampantly. Hence, whatever report DRC gets is not necessarily correct.”

“Even if there is no tax duty there’s an issue of remittances, so under valuation, must be there” she added.

DRC stated that it is not feasible to report the unit price of smart phones through POE’s data because mobile phones costing Nu 10,000 or cheaper up to Nu 200,000 are placed under one code. โ€œSo when you do the average of the prices, the finding is not accurate,” said Customs head.

On the other hand, the Office of Consumer Protection (OCP) said that they have not received any complaints regarding mobile sellers charging exorbitant prices till date.

Some consumers couldn’t replace older phones with new models even though the two network providers encouraged switching to the 5G network. They are forced to buy used phones as prices of new phones are beyond their budget means.

A consumer said, “Unless OCP intervenes, the price up trend of smartphones doesn’t seem to stop anytime soon.”

Moreover, the manufacturers of the smart phones changed their tactics to sell less and more expensive phones after studying the market and consumer behaviour of sticking to old phones.

DRC also informs that though the mobile phone tax is zero as of now, the importers still need to pay taxes for mobile accessories like Iwatch, phone cases, headphones, chargers and power banks. Similarly, tax was never imposed on information and communication (ICT) materials. ICT materials come under machinery items like Laptops, desktops, computers and tablets which are essentially used for offices.

A concerned citizen suggests mobile phone importers to import directly from the manufacturers when they don’t have to pay taxes and sell it at cheaper rates to the consumers. And another customer requested OCP to intervene.

A consumer said, “The prices of phones will not only burn a hole in the consumer’s pocket but the whole pocket will turn to ash.”

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