Despite being a so-called “Developing” country, it seems that practically everyone in Sri Lanka has two mobile phones. This is borne out by official statistics – there were 32 million active mobile connections in January 2024, for a population of 22 million. Most, if not all, of these phones are data-enabled smartphones that can access the Internet.
Everyone realised the value of having a smartphone during the Covid-19 pandemic when schools and most offices went online. Suddenly, the phone was a lifeline to the outside world and an indispensable tool for survival. The downside was that phones too became a victim of the Government’s strict import ban as it tried to save foreign exchange.
Two things happen when the import of any consumer item is banned – an artificial demand is created and smugglers go into action. This was indeed why there was no real paucity of phones in the market even when the import ban was in effect. On the other hand, there was no real method of assessing the quality of these phones, with many inferior makes and models making their way into the hands of unsuspecting consumers. Even now, long after the import ban has been lifted, Customs officials frequently detect attempts to smuggle in high-value phones. Just a few weeks ago, a passenger was caught bringing around 90 high-end Apple and Android smartphones. There must, of course, be other instances which are not detected.
Hence, the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) has announced the implementation of an International Mobile Equipment Identity (IMEI) registration system to curb the use of unregistered mobile devices in the country.
This new online system, which will go live on January 29, requires all mobile phones to be registered for compatibility with local mobile operators. This is a long overdue measure that must be implemented strictly. There were several previous attempts to enforce this measure, which somehow fell by the wayside. The TRCSL must avoid that fate this time around. Hereafter, the public is advised to purchase SIM or eSIM enabled devices, such as mobile phones, tablet computers, and dongles, only from vendors with a valid TRCSL Vendor Licence. Moreover, all such devices must have an IMEI number approved by the TRCSL.
Starting from January 29, non-TRCSL registered SIM enabled devices will not function on any telecommunication network in Sri Lanka. This applies only to new devices purchased on or after this date. Therefore, devices already connected to the cellular networks before January 28 will not be affected by this new regulation along with devices used by foreign visitors.
Fortunately, the TRCSL also offers a legal pathway for those who wish to import a phone or tablet for personal use. Accordingly, those importing SIM-enabled devices into the country must register them through the new Equipment Clearance System (ECS), which will also require approval from other relevant Government institutions, including Sri Lanka Customs, the Department of Import and Export Control, and the Ministry of Defence. This is aimed at making life difficult for commercial-scale smugglers while still facilitating the import of such electronic devices for personal use. The process appears to be cumbersome, but it gives peace of mind to the end user. If purchasing locally, buyers must ensure that the device carries a TRCSL-approved IMEI number. They can also verify the IMEI number and TRCSL approval via SMS.
Yet, the Government must also address the elephant in the room – the exorbitant prices of even mid-range legally imported phones, owing to a slew of duties and taxes including Value Added Tax (VAT). The same goes for tablets and laptop/desktop computers. All these devices are vital for the country’s digitisation and e-Government drives, apart from their role in education and enterprise.
It was in this context that many taxes including VAT were not applied to smartphones and computers previously since very high prices have the effect of limiting access to these devices to a wider segment of the population. However, the previous Government imposed taxes on all such devices apparently to comply with conditions imposed by the International Monetary Fund (IMF) to grant the US$ 2.9 billion Extended Fund Facility (EFF). This dealt a double blow to consumers who were already battered by the depreciation of the Sri Lanka Rupee (LKR) against the US Dollar (USD).
Although key figures in that Government maintained that the IMF agreement was set in stone, the present National People’s Power (NPP) has proved them wrong by changing some of the IMF conditions pertaining to taxes. Thus, the Government should explore the possibility of negotiating a tax exemption or concession for digital devices such as phones, tablets and computers. This will make them more affordable across the board, enabling more people to purchase them outright or on monthly instalments.
To cite just one example, an Intel Core i5 equipped laptop computer with 16GB RAM memory and 512 GB Solid State Drive (SSD) generally recommended for students costs around US$ 500 (approx. Rs.147,000) in the US, whereas the same machine will cost around Rs.230,000 here, an extra Rs.80,000. If at least some of the taxes can be slashed, this computer can be priced at around Rs.170,000 – 180,000 in the local market, instantly making it more accessible and financially bearable.
Some Returns on Investment (ROI) cannot be measured in terms of money alone. This is indeed why successive Governments have followed a free education and healthcare policy, thanks to which Sri Lanka’s indices in the same fields are on par with those of the developed world. Likewise, reducing taxes on digital devices may lead to a temporary revenue shortfall which will be offset in the long run by a more informed, more educated citizenry. In our opinion, that is a call that the Government should take.
