Lahore- The recently proposed 5 per cent withholding tax on automobile industry will not only shoot up the prices of different models of cars by thousands of rupees but also cause further decline in the sales of automobiles, warned the automobile assemblers representatives’ body.

Director General Pakistan Automotive Manufacturers Association Abdul Waheed Khan opposed the proposed move saying the new proposed fiscal measures would hit the auto industry hard which is already struggling to recover from its significant sales drop in the past two years.

Sharing the statistics, he said that the cumulative sales for ten months of financial year 2012-13 has fallen 24% year-on-year due to huge influx of used cars that clocked in at 55,000 units in financial year 2011-12 and 40,000 in FY2012-13 till April 2013. ‘The amnesty scheme to register smuggled cars further worsen the situation which affected the sales recovery of local brands,’ he added.

He further said that the industry’s production slowed down against its capacity in the last two financial years and now the new taxes will further put the sustainability of the automobile sector companies in crisis. Hence, the sales and revenues will not be maintained for longer period,’ he added.

‘The auto industry, which contributes 2% to the GDP of the country, does not expect such harsh measures from business friendly government as it would result in sharp decline in sales,’ he said, adding that this will also cease the new expected investment in the industry and the current automakers would consider reducing the numbers of their skilled workforce. ‘Local auto industry has long been the victim of unfavorable policies including import of used cars and the amnesty scheme.

No prudent government would like to follow in the footsteps of previous governments which failed to formulate investor friendly policies, and in fact sidelined local manufacturers and vendors,’ he added.