A report released by the Policy Research Institute of Market Economy (PRIME) says Pakistan’s smartphone taxation system is significantly increasing device prices and widening the country’s digital divide.
According to the report, a smartphone priced internationally at around $700, or nearly PKR 196,000, ends up costing Pakistani consumers approximately PKR 294,500 after the addition of regulatory duties, sales tax, mobile levies, and withholding taxes. This translates into an effective tax burden of 50.26 percent.
The study, titled “Taxing Connectivity: How Taxes and Tariffs Deepen Pakistan’s Digital Divide,” argues that affordability — rather than network availability — has become the biggest barrier to internet adoption in Pakistan.
While 81 percent of the population lives within 3G and 4G coverage areas, only 29 percent actively use the internet, leaving a national usage gap of 52 percent.
Researchers said heavy taxation on smartphones and telecom services is restricting digital access for millions of low-income users and making Pakistan one of the most expensive smartphone markets in South Asia for premium devices.
The report also highlighted the broader tax burden on the telecom sector, noting that mobile services are subject to multiple federal and provincial taxes. According to PRIME, nearly 42 percent of telecom operators’ revenues are absorbed by taxes and regulatory charges, limiting investment in network expansion and advanced technologies such as 4G, 5G, and fiber broadband.
The study further criticized Pakistan’s Mobile Device Manufacturing Policy 2020, stating that local smartphone assembly has failed to achieve meaningful localization targets. Although the sector generated over 60,000 jobs and attracted around $300 million in investment, localization levels remain below 10 percent, far below the official target of 49 percent.
Researchers also warned that high taxes are encouraging growth in the grey market through illegal IMEI cloning and software patching. The report noted that the Pakistan Telecommunication Authority (PTA) blocked nearly 100 million unauthorized devices during FY2024–25, including cloned and counterfeit phones.
PRIME recommended replacing the current tiered taxation structure with a uniform 18 percent sales tax on imported smartphones, arguing that lower taxes could improve affordability, reduce smuggling, and help increase internet access across the country.
