LAHORE - The government is suffering a loss of about $1,950 to $3,781 on import of each used car, translating into the total loss of more than $68 million in the fiscal year 2013-14, as dealers are commercially importing used cars from Japan by submitting photocopies of unidentified passports at the time of clearing despite the fact that commercial import of used cars is totally banned under the import policy. The Customs is losing $ 3,781 on import of 1000cc used cars, $2,006 on 1300cc, $ 1,950 on 1500cc, and $2,065 on 1800cc used cars, respectively.
Industry sources said that as no verification of any kind takes place at any stage in the customs department dealers are absolutely free to abuse the ‘Personal Baggage & Gift Scheme’ meant solely for facilitating non-resident Pakistanis to import their own personal cars from Saudi Arabia, Middle East, UAE, Europe etc.
In budget 2014-15, FBR had raised the duty rates on import of used cars under SRO 577(I) 2005 but only by an abysmally low rate of 10 per cent as against rupee devaluation of 70 per cent but this low duty is not being implemented fully.
The duty & taxes rates fixed in SRO 577 for up to 800cc cars is $ 4,800 as compared to duty and taxes on import under normal tax regime of $8,596. On a three-year old used car, depreciation allowance of 36 per cent is also allowed. The concept of depreciation itself is unacceptable because the cost of a 3-year old car is already over 40 per cent lower than a new car. After the depreciation allowance of 36% on three-year old cars, duty and taxes on up to 800cc car under SRO 577 reduces further, from $4,800 to $3,072, as compared to duty and taxes under normal tax regime of $5,501, thereby inflicting a loss of $ 2,429 to national exchequer on import of every 800cc car.
The auto industry has been continuously presenting its case to FBR and Finance & Commerce Ministries that government is losing millions of dollars on import of used cars every year. Government seems to be helpless in revising the duty and taxes rates to a respectable level and succumbed to the pressure of strong used car importers’ lobby by allowing them to falsely import vehicles in the name of overseas citizens.
The industry stakeholders said that they have taken up the issue time and again at various ministry levels, requesting the government to rescind or at least revise the fixed duty and taxes rates in SRO 577 to an equitable level, but our voice remains unheard. This huge subsidy given to used car traders’ mafia is causing unforeseen and heavy losses to Pakistan’s automobile and auto parts industries, as these traders are abusing the import policy but neither FBR nor Ministries of Commerce or Finance have taken any counter-measures to stop this menace.
Pakistan Association of Automotive Parts & Accessories Manufacturers Chairman Siddiq Misri and Senior Vice Chairman Mumshad Ali stated that this is the right time for the government to put an end to anti-auto industry policies, as it is the government’s responsibility to provide conducive environment to both current and new investors in the automobile sector. In the last two years, three new manufacturers have entered into the Pakistani automobile market and some more are in the pipeline.
Siddiq Misri suggested the government to take a serious look at manufacturing sector and tell us how they can explain the current slump in the industrial groups, and what plans they have for its revival. Mumshad Ali observed that the real test of economic leadership lies in getting the wheels of manufacturing to start turning again, adding that if the government wishes to provide subsidy to Pakistanis living abroad, then it should provide subsidy on purchase of locally produced cars to non-resident Pakistanis, as this will create a win-win situation for the Pakistani expatriates as well as the local automobile, auto parts and engineering industries of Pakistan.