Flaws Detected in Assessment and Valuation of Mobile Phones

Flaws Detected in Assessment and Valuation of Mobile Phones

Karachi, August 30, 2023 – The Federal Tax Ombudsman (FTO) has issued a directive to customs authorities, urging them to rectify significant flaws in the assessment and valuation process of mobile phones.

This move comes in response to a complaint filed against the Director General of Customs (Valuation), Karachi, highlighting issues related to the incorrect assessment and computation of duties and taxes concerning mobile phones’ value.

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The complaint was forwarded to the Secretary of the Revenue Division for evaluation and comments. In response, the Director of the Directorate General of Customs (Valuation), Karachi, emphasized that Valuation Ruling No. 1732/2023 was issued on January 23, 2023, after extensive consultations with stakeholders, including a recommendation for depreciation up to a maximum of 60 percent.

During the complaint’s hearing, it was reiterated that it is the responsibility of assessing officers to accurately appraise goods in line with applicable Valuation Rulings. Notably, the complainant failed to attend any hearings despite multiple notices.

Additional comments were received from the Collector of the Collectorate of Customs, Jinnah International Airport (JIAP), Karachi, stating that the PTA DIRBS System has been operational since January 2019. This system was established to register mobile devices brought in by international travelers, mobile devices with individuals who are not travelers, and devices imported through postal/courier services or informal channels by local traders.

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The assessment of duty and taxes for popular mobile devices is carried out through the WeBOC system by Deputy Collector (MIS), JIAP, Karachi. For mobile phones not on the uploaded list, the assessment is conducted by the Assessing Officer, referencing valuation advice/rulings issued by the Directorate of Valuation, Karachi. Additionally, a Change Request Form (CRF) for the inclusion of exchange rate updates has been forwarded to the Directorate of Reforms & Automation. The PTA DIRBS System is regularly updated to reflect changes in valuation rulings and tax regulations.

Despite the complainant’s reservations, not attending in-person hearings, it has become evident that the concerns raised are not entirely unfounded. Customs authorities frequently employ improper methods in assessing duty and taxes on mobile phones, leading to misclassification and higher duty rates. This places a significant financial burden on importers.

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Furthermore, there is a notable lack of consistency and uniformity in valuation methods employed by customs officials. Often, the declared value of mobile phones is disregarded without clear justification. This inconsistency not only violates fairness principles but also undermines trust between importers and customs authorities. To address these issues and prevent potential disputes, clear guidelines and standard operating procedures must be established to ensure consistent and accurate valuation practices.

In addition to these concerns, customs authorities often overlook the depreciated value of used mobile phones when assessing duty and taxes, resulting in overcharging. To rectify these issues, the Federal Board of Revenue (FBR) has recommended the following measures:

Mobile phones should be accurately classified based on appropriate tariff codes.

Consistent and uniform valuation methods should be applied, with due consideration to the declared value unless clear evidence of misdeclaration is present.

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The appropriate depreciated value of used mobile phones, based on physical condition and model, should be applied to prevent unwarranted overcharging.

The FTO’s intervention underscores the need for a systematic overhaul of the assessment and valuation process for mobile phones, with the goal of ensuring fairness and transparency for all stakeholders involved. Importers and customs authorities are expected to work together to implement these recommendations and improve the accuracy and consistency of mobile phone valuation practices.

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