When is a phone not a phone? When it has GPS capabilities or a TV receiver. Then, it's a "multifunction device," according to the European Commission, which has proposed levying import duties of 3.7, or 14 percent, respectively, on these high-end devices.
Under a 1996 agreement, telephone handsets coming into the European Union are exempt from import duties, but TV receivers and GPS navigation systems aren't. When two EU countries decided to tax some smartphones in 2008, the European Commission moved to ensure that every country played by the same rules by reclassifying GPS- and TV-equipped handsets.
The cry of industry pain was heard round the world.
"The timing is absolutely awful. Europe is backward in terms of rolling out services," said Anders Norström, MobiTV Europe's managing director. MobiTV wouldn't be as hard hit by the tax because the service uses the carrier network and doesn't require a receiver in the handset.
"But in the long run for the market, this is awful. When they have these kinds of taxes, it will almost be a show stopper. Carriers are not willing to absorb this. Broadcasting technology such as DVB-H, from carriers' perspective, is a competing solution — if they subsidize the phone today, why should they subsidize this? It can turn different channels into competitors."
The commission's plan is slated for discussion by the Customs Code Committee, which can make a decision.
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