LAHORE - Pakistan Automobiles Assemblers Dealers Association (PAMADA) has asked the government to probe what it called the biggest impediment to new investment: misuse of baggage and gift schemes for the imports of used cars.

“This misuse is also resulting in huge losses to the national kitty,” PAMADA Chairman Iqbal Shah.

He said, “We have grave concerns over the illegal and unchecked import of used cars right under the nose of FBR. Smuggled and non-duty paid vehicles are a very small part of illegal car imports and if the government is serious in countering this trend, it should stop the misuse of used cars import schemes.”

“This is because such imports are increasing continuously as more than 54,000 units were imported in 2015-16 as compared to 30,000 units in the corresponding period of the last year,” he elaborated. He added the numbers of used cars being imported under different schemes were still on the rise as more than 8,500 such vehicles were imported during just two months of the current financial year.

According to details, approximately 4,440 vehicles were imported in July 2016 and 4,076 in August 2016.

The break-up of these vehicles shows that 4,471 of these were below 800cc, 1584  between 800cc and 1000cc, 1549 between 1500cc and 1800cc while 912 vehicles of 1800cc (Luxury, SUVs, trucks, busses and LCVs).

Shah added that in the last 10 years, over 300,000 used vehicles had made their way to the country, capturing a prominent chunk of the market, while the surge in their imports was also responsible, to some extent, for the closure of plants of Hyundai, Nissan, Chevrolet, Fiat and Adam. “The vehicles are imported as a non-commercial commodity and then openly sold against hard cash in the market.

At an average value of Rs1.5 million per used car, this activity had generated grey economy of over Rs80 billion in 2015 alone,” he added.

Another problem, he added, was that the custom levies on second-hand vehicles were not applied ad-valorem. “Instead, a fixed amount in US dollars has been notified under SRO-577, which includes custom duties, sales tax and withholding taxes on an arbitrary and unknown basis,” PAMADA chairman explained.

“These fixed duties are highly suppressed, causing loss of tax revenue to the government. This also effectively subsidizes imported used cars, causing serious damage to the domestic auto industry,” he pointed out.

Referring to a recent probe into a loss of approximately Rs43.728 million to national exchequer because of amnesty scheme for smuggled motor vehicles, he said that although the FBR was apprehensive about the low valuation of over 500 vehicles under the scheme, it was indifferent to the valuation differences for imported used cars, resulting in the loss of billions of rupees.a