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Mobile VAT and customs revenue up tenfold

File - A man speaks on his phone as he leaves a mobile shop in Beirut, Tuesday, March 19, 2013. (The Daily Star/Mohammad Azakir)

BEIRUT: The Telecoms and Finance ministries’ recent initiative to curb widespread mobile handset smuggling – aiming to increase customs and VAT revenues by $60 million – has been very fruitful so far, officials say. Rita Khairallah, project manager at the Telecoms Ministry, told The Daily Star that the project had seen impressive success. An assessment conducted by the ministry after the first three months of implementation showed that Customs and VAT revenues multiplied by more than 10 times, she said.

“The assessment for June, July and August showed that VAT and customs fees on mobile handsets have multiplied by 10 to 12 times, in comparison to the same months last year,” she said, adding that exact figures would be announced by the Telecoms Ministry shortly.

A senior Finance Ministry official confirmed a substantial increase in VAT and customs revenues from mobile phone imports, but would not provide exact figures.

“Our estimates that 80 to 90 percent of the market was dominated by smuggled phones proved accurate, [as the percentage of smuggled phones decline] we expect the upward trend in revenues to carry on,” Khairallah said.

Utilizing the International Mobile Station Equipment Identity, a unique number assigned by manufacturers to every handset, the ministries have joined hands with importers and the Customs Department to create a database of legally imported phones.

Without having their duties and VAT paid, importers cannot register handsets on the database, and therefore these mobiles will be unusable on Lebanon’s two mobile networks managed by operators Alfa and touch.

Licenses to legally import handsets have increased from two per month to more than six per month, Khairallah said, adding that this would also boost state revenues significantly.

Asked whether smugglers were still able to find loopholes, Khairallah said that such initiatives could not be 100 percent successful.

“There will always be loopholes. But the point is to restrict smuggling to as little as possible,” she said.

For instance, some smugglers have been abusing a regulation allowing Lebanese citizens and foreigners to register up to three devices every six months for personal use upon entry through airport and border crossings.

“Some people have been abusing this and using their passports to register smuggled mobiles to the database,” she said.

“The ministry is now moving to restrict foreigners to the right to register only one device a year. “

The chairman of the Telecoms Regulatory Authority, Imad Hoballah, discussed how the initiative would help curb smuggling as well as ways to assure full compliance in an interview with The Daily Star earlier this year.

“Registering the IMEI of mobile devices, to be used on the Lebanese telecoms networks, registered in a database, will play a major role in curbing smuggling,” he said.

“However other measures must be taken to ensure that the process works properly and bears its fruits. ... We could add additional guarantees by applying selected part of the Type Approval process proposed by the TRA as soon as possible,”

The Type Approval process, being proposed by TRA, sets out regulations for how mobile devices will be assessed or tested and the requirements and standards that must be utilized before approving and registering devices in Lebanon.

“The essential problem resulting from smuggling mobile phones and telecommunications equipment is that such equipment enters Lebanon and is used in the market without any conformity assessment or testing of its compliance with the Lebanese and international standards,” he said.

Such equipment could cause lots of interference and have a negative impact on the quality of the services and the consumer’s health.

“Without performing the Electro Magnetic Compatibility and the SAR tests to ensure compliance of such devices with the basic requirements and restrictions to limit unacceptable emissions and human exposure to electromagnetic fields, this equipment can have severe impacts on consumer health,” he said.

Asked whether smugglers could find technical loopholes in the IMEI system, Hoballah said that this should be a concern – particularly because of the need to protect privacy.

“There are many methods and technologies that enable users to easily unlock the IMEI of a mobile device. Therefore without having strong security processes, technologies, expertise and mechanisms, the database can be hacked and the privacy of consumers can be invaded,” he admitted.

“We will not address in public the steps that are or should be taken at this point to avoid getting the information in the wrong hands.”

 
A version of this article appeared in the print edition of The Daily Star on September 28, 2013, on page 4.

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