Mobiles worth hundreds of millions being imported and possibly deflected to India

A review by the Economic and Finance Committee (EFC) of the National Assembly has found that while mobile phones worth billions are being imported into Bhutan a large chunk of it is suspected to be deflected to India.

The EFC Chairman MP Kinga Penjor who led the review or investigation said this possible deflection is happening due to the mobile tax difference with India where high end phones like iPhones are more expensive.

He said the reduction of taxes on mobile has helped as it is used by everyone, but one aim of the taxes was to protect our foreign reserves.

He said in 2019 only Nu 500 mn was spent in importing phones, in 2020 it was 1.6 bn and in 2021 it increased to Nu 2.4 bn which he said is very worrying and so they had long discussions with the concerned officials and stakeholders.

“First we looked at how much was being imported. The second thing we checked is if it tallies with the number of new subscribers. It does not mean it will tally 100% but it will provide an indication,” said Kinga.

He said while checking they found 122,000 phones worth Nu 2.5 bn were imported from last year June 2021 when the tax was lifted on phones to this June 2022 this year.

He said they looked at data for 12 months since the tax was lifted.

The EFC looked at new SIM subscribers from the two Telcos. Tashi was down by around 3,000 subscribers and Bhutan Telecom went up by around 19,000 subscribers.

The question for the EFC was on where did the more than 100,000 phones go.

“We suspect deflection  with phones going to India. In 2022 the total subscribers of Tashi and B are 745,000. Tashi has 266,000 while B has 479,000. We are wondering how 100,000 plus phones came in a year and the main worry is on the money (reserves) going out. It can be deflected via smuggling,” said Kinga.

Kinga said they kept provision for phone replacement where people would not get new SIMs but only replace the phone.

“They (officials) were telling us that during lockdown time people could not buy phones and later when people went for training they bought phones. Even if it is so, it does not explain the 122,000 phones in a year,” the MP added.

He said there is only around 20,000 new subscribers and replacement can be seen as another 20,000 which is 40,000. There there are kids who will get phones and they kept 11,000 phones for it looking at school data.

However, even this it still did not account for 71,000 phones of the 122,000 imported in 12 months.

“We told MoF and DRC that this needs to be looked it and we are suspecting deflection,” said the MP.

He said they checked the retail price in Bhutan and Jaigaon and it is relatively cheaper in Bhutan.

“Now if it is relatively cheaper in retail then if the Jaigaon businessmen buy in bulk and take it back then it will definitely be cheaper. The mobile is a high value item and small in size and can be carried in a small bag or beer cartoon,” said Kinga.

He said in the committee the discussion came up that they are not losing money but it is principally and legally not right.

According to a source the Department of Revenue and Customs (DRC) is doing a study on the import of phones and where it may be going.

The source said that since phones don’t have tax in Bhutan there are these companies and businesses involved in importing Fast Moving Consumer Goods like packaged foods, beverages, make up, toiletries, candies etc who bring in containers into Bhutan and these people are also bringing in phones and especially iPhones.

The iPhones are cheaper in Bhutan than in India. They bring the iPhone and then put it in the forefront in Gelephu, Phuentsholing in shops.

People from across the border come in and buy the phones.

These importers are importing fast food and others goods from Bangkok and Indians in Bangkok will tell them to take 10 to 15 phones in their consignment and so their transportation cost will come out.

As a result, people who were not doing the phone business are now doing the phone business.

The source said, “There are not much legalized phone dealers as they are all recorded. These guys who are doing the container business have started putting phones in the container due to the tax difference.  Its like bringing heaters and rice cooker because they do not have tax. Now they are putting phones and selling at the border.”

The phones will be declared at the customs but it will be at a zero rate and it will be kept in the shops. One Indian can come across buy a phone iPhone and pass through the check post.

The source said the main loss is in terms of our convertible currency used to import the phones.

The person said that they cannot question if one person is selling one or two phones to a person, but if a person is selling ten or more phones to a person then that person can be questioned for deflection.

Most of the deflection may be happening in Jaigaon and also in Hatisara where Assamese people come in and possibly also in Samdrupjongkhar. iPhone in India has 40% tax.

There are also chances of the iPhones being used to convert some of the Bhutanese currency in Jaigaon into INR. A Phuentsholing business will not insist on INR and will sell the phone for Ngultrums and the person can go across and sell it for INR and that too for a small profit.

Lyonpo Namgay Tshering said there is no investigation launched on the issue that he is aware of.

He said they might not necessarily be getting a new  SIM and may be using the old SIM. He said another reason could that in 2020 and 2021 because of the COVID there was online learning and so every student had to resort to a smart phone.

Lyonpo, however, said, deflection is possible though they have not recorded any instances yet.

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