Mobile phone prices are likely to increase

Higher VAT should be paired with
more control on illegal imports

The prices of mobile phones are expected to increase with the Parliament’s ratification of a draft law raising the value added tax (VAT) on imported handsets and accessories. The Cabinet had resolved to increase the VAT on mobile phones and accessories to 15 percent, as one of the proposed sources to fund the public sector’s salary scale.

“Prices of mobile devices will rise along with the tax increase,” said Alain Barakeh, Business Unit Manager of Mobiles division at Cherfan Tawil (CTC), the exclusive agents for Samsung.

“Importers were already subject to a ten percent VAT plus a five percent customs fee, thus the new regulation will be raising the total taxes to 20 percent,” said Barakeh.

The Ministry of Telecommunications (MoT) had previously issued a decree mandating mobile phones importers to register the international mobile equipment identity (IMEI), a serial number that identifies each mobile phone at the two local networks operators. With this measure, illegally imported handsets will not be identified by the local networks, and accordingly will not be operational.

“If the government does not start implementing the IMEI regulation, legitimate importers and suppliers will be facing a major drop in their business, due to the price increase and the inequitable competition from illegal importers,” Barakeh said.

Youssef Jannoun, Sales Executive at Class Cellular-ABC Ashrafieh, said authorized mobile phones retailers will be equally affected if the IMEI does not become applicable. “However if illegal imports were controlled we would expect an increase in sales.” Class sells around 200 mobile handsets on daily basis in their 12 shops. This amounts to around 6,000 phones per month.

The local market consumes around 100,000 mobile phones on a monthly basis, according to Barakeh. “Up to 90 percent of this amount is being imported illegally,” he said. CTC imports 6,000 handsets per month.