The government is incurring a loss of huge revenues due to illegal sale of handsets
Popular cell phone handsets with other gadgets are frequently entering into the country with garment accessories and other products stuffed in the containers to dodge huge tax revenues.
Market sources said after the tax increase, handsets’ markets are facing a volatile situation specially the high-priced handsets.
In the last budget for the current fiscal 2014-15, 15% VAT has been introduced to the mobile handsets for the first time.
The government also imposed on handsets an “education surcharge” for the first time thought it reduced import duty.
“We know that lots of garment containers are loaded with mobile devices with other garment accessories and thus the government is being deprived of huge taxes,” said Ingmar Wang, director of device business, Huawei, a new brand that newly entered the market.
Ingmar, however said, the market has much potential and so they have a plan to secure at least second position here in terms of market share.
“We are well aware about the taxation and other regulations and we think high tax (22.5%) is helping flourish the illegal market,” Ingmar said.
Visiting different popular markets, the Dhaka Tribune found that the city markets are flooded with mostly high-priced illegal mobile handsets.
Sources said a gang of namely “Luggage Party” is behind the supply of those handsets in the market.
The Dhaka Tribune visited Bashundhara Shopping Mall, Motaleb Plaza and Eastern Plaza, prominent centres for handsets, and found that illegal trading is on the rise ahead of Eid.
The shopkeepers in the malls are found to have been selling the brand handsets that have no authorised importer or distribution channels.
These shops sell popular brands of handsets like Apple, Samsung, HTC, Blackberry, Sony even without any warranty and with a much cheaper price than the legal channels.
Sources in the market added that these products are mostly used, refurbished and low configured while some users are careless about it also.
Recently, Samsung sent a letter to the Telecommunication Regulatory Commission (BTRC) where it clearly narrated structural problems of taxation, adding that some business entities were cashing in on the situation.
In the letter, Samsung also mentioned that the company in its own survey found that the government was losing revenues of more than Tk4 crore every month due to these illegal handsets.
Samsung collected data from Bashundhara City Shopping Mall and Eastern Plaza for the month of June on its Galaxy S5 and found the government lost revenues of Tk16.60 lakh on the single item alone.
The Dhaka Tribune obtained a copy of the letter and learned that Samsung sold 1,200 products for Tk60,000 each, whereas in the grey market, 350 units were sold at Tk44,900 each.
Samsung said the government duty is Tk4,743 each on S5, and the illegal sale of the device in the market made the government lose revenues of Tk6.60 lakh every month.
Following the Samsung allegations, the law enforcement agency raided a shop in Gulshan and ceased products illegally imported and sealed the shop.
But some days afterwards, that shop opened again and is running its business now.
Contacted, Hasan Mehdi, head of marketing of Samsung Electronics, said: “They are facing challenges and are bound to cut costs and reduce the price of different products also.”
Another senior executive of the company said if this situation continues, Samsung would have to think otherwise.
Traders of different markets also said “Luggage Party” while back home from travelling abroad bring the handsets in their personal luggages to evade tax.
Md Murad Hossain, proprietor of Mobile House at Bashundhara City Shopping Mall, said most handsets did not have clearance from the telecom regulator or customs.
Jamal Uddin, an authorised dealer of Symphony in the shopping mall, said most high-priced handsets come through illegal channels as the international brands like Apple, HTC or Blackberry do not have distribution networks in Bangladesh.
Some shopkeepers, however, admitted that they bought handsets from those importers that bring handsets in that way.
Asked why they do not provide warranty of the handsets if those are legal, a shopkeeper of Eastern Plaza said those handsets need to be sent to Singapore or Taiwan for servicing.
“Seriously we are frightened about the situation, and the situation is going out of control day by day; no doubt taxation is the only reason there,” said Aminur Rashed, chairman and CEO of Symphony, a brand that obtains 50% market share of Bangladeshi market.
According to Bangladesh Mobile Phone Importers Association data, in the financial year 2001-02, around 95% handsets were imported illegally, but reduced to 4% in the FY14.
The association also commented after the budget proposal that the increased tax would lead to availability of illegal handsets in the markets.
It said the import of handset increased to 2.01 crore in the FY14 from 6.22 lakh in the FY05.
Source: Dhaka Tribune