In a move that has angered handset manufacturers, the European Commission is planning on taxing certain smartphones, Reuters (via the Guardian) reports. Last week, the EC sent member states a proposal—not yet disclosed to the public—that would reclassify “sophisticated” phones as “multi-function devices” that would be subject to customs duties. Mobile phones that have built-in TV receivers would be taxed up to 14 percent, while those with built in GPS would face a 3.7 percent tax. Phones with full-QWERTY keyboards and advanced cameras are also being targeted. The timing of the proposed taxes couldn’t be worse. Since the beginning of the year, cell phone sales in Europe have been falling, while at the same time the average selling price for phones has been shrinking. According to Strategy Analytics, the new year doesn’t look any better, with mobile shipments to Western Europe set to decline another 9 percent in 2009. In November, Nokia (NYSE: NOK) warned that mobile sales would fall in 2009.

Nokia and the struggling Sony (NYSE: SNE) Ericsson (NSDQ: ERIC) were especially angry over the proposed duties. A Sony Ericsson spokesman told Reuters that the taxes would “inevitably” lead to higher prices for consumers, at a time when all handset vendors were “struggling” to keep prices down. A Nokia spokesperson said the proposed tax was in “nobody’s interest” and would drive up the cost of smart phones, putting them out of the reach of European consumers. Rather ironically, on December 10, the same day the Commission’s customs unit proposed taxing smartphones, its telecoms unit sent guidelines to member states on launching mobile TV and encouraging consumer uptake. The Commission’s Customs Code committee will discuss the proposal in February. Maria Assimakopoulou, spokeswoman for EU Tax Commissioner Laszlo Kovac told Reuters that no decision was imminent and the discussions around the taxes would take at least six months.