EU drops plan to tax phones with GPS

The European Union has decided to halt a controversial plan to introduce new taxes on cellphones.

The plan would have raised phone prices for consumers and further squeezed already shrinking phone sales on the continent.

Sweden, which holds the rotating presidency of the EU, said a large majority of the countries voted for the duty-free treatment of cellphones to continue in the Customs Code Committee’s meeting.

In December, the EU Commission sent member states a formal proposal to reclassify many phones as “multi-functional devices,” which would have triggered a 14 percent tax on phones with TV receivers and 3.7 percent on navigation-enabled phones.

Europe’s top cellphone vendors, Finnish Nokia and Swedish-Japanese Sony Ericsson, and the Nordic countries strongly opposed the tax. While GPS chips are currently used mostly in top-end cellphones, Nokia and others are increasingly looking to use them in mass-market phones.

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