All it takes is a modified fancy car to leave the tax authorities scratching their heads.
The authorities released a luxury car, Hummer, after charging import duties applicable for commercial vehicles, leaving the remaining Rs80 million of duties in dispute. Tax experts, meanwhile, differ with each other over novel classifications for the vehicle.
After the importer and the Federal Board of Revenue (FBR) officials disputed over the category and value of the vehicle, the Federal Tax Ombudsman (FTO) intervened on complaint of the importer.
The ombudsman issued a provisional order asking the FBR to release the “expensive vehicle” and accept post-dated cheques of the disputed amount.
The FTO also asked the FBR to constitute a committee to determine the value and the category of the vehicle.
10 seats too many
The importer, Mohammad Azam allegedly imported the vehicle for a former federal minister who enjoys significant clout in the ruling party.
Under the law, luxury vehicles are charged 150 per cent of the value in duties while on commercial vehicles, the duties amount to only 20 per cent of the value.
“The customs classification is based on seating capacity, not ‘luxury’ vehicles,” said Mohammad Ramzan Bhatti, adviser to the FTO on customs affairs.
“If a vehicle is above ten seats, it falls in the bracket of lesser duties and the Hummer is a 20-seat vehicle,” he said.
Denying that the FTO pressured the FBR to release the vehicle, Bhatti said that the FTO did not intervene on its own. It did so only after the importer complained against the FBR.
He said the FTO’s order was not final as the final decision authority was given to the FBR in the order.
Under the law, the FBR can contest the FTO judgment and may either file a review with the FTO or could give a “representation to the President of Pakistan”.
In this case, the FBR has neither filed an appeal nor sent a representation to the president.
FBR defends itself
“We did not release the vehicle on our own but did it on the FTO’s orders”, said FBR Chairman Salman Siddique.
When asked why he did not file an appeal, the chairman said: “If we believe that it is not a commercial vehicle, we can still go to the president for remedy.”
“The seat capacity as a determining factor is only relevant to commercial vehicles and the Hummer is evidently a luxury one,” said Dr Ikramul Haq, an advocate of the Supreme Court and an international tax counsel. He said the purpose of the vehicle is also a crucial factor and in this case who would use such a car for commercial purposes.
According to a customs official in the FBR headquarters, the importer initially declared vehicle’s value at $20,000. It was later revised upward to $51,000 after the intervention of the customs staff.
He said the category would now be determined by a committee of manufacturers, chamber representative and customs officials.
Published in The Express Tribune, July 2nd, 2011.
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