KARACHI: The Pakistan Automobile Assemblers Dealer Association (Pamada) has requested the federal government to avoid discriminating against local auto industry and collect withholding taxes (WHT) on used cars at the stage of import to ensure revenue collection and end disparity.
Pamada Chairman Iqbal Shah said in a statement that the government has lost over Rs100 million in three months due to the ignorance of the Federal Board of Revenue (FBR) as they could not collect WHT on imported used cars since July.
“The FBR collected WHT through provincial excise departments only from new vehicles due to technical and procedural issues with their systems,” said Shah. “This spared over 5,000 imported used vehicles from the tax, hence a loss of millions to the national exchequer.”
FBR had made categories of tax return filers and non-filers for the public registering their vehicles with the provincial departments.
“The WHT on new cars is collected by Original Equipment Manufacturers; however, used cars have been exempted because of non-availability of filer or non-filer information.”
The chief has termed this a fatal blow to the national exchequer that is already facing heavy losses due to the imports of used cars by using illegitimate means.
“It is strange that the FBR supports elements that damage national interest. The imports of used cars, which eat up the market of new locally made cars and promote the use of forged documents as well,” he said.
“It is beyond comprehension how the FBR has failed to collect WHT from used vehicles.”
He said that during the first quarter (July-September) of fiscal year 2014-15, cars sales decreased by 3.2% as compared to same period last fiscal year due to increase in taxes. The government may face further loss in revenue as huge numbers of vehicles did not give WHT, damaging hopes of adequate tax collection.
Published in The Express Tribune, October 18th, 2014.
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The great inefficiencies that these local car assemblers are causing, I'd say, are more hurtful ad dangerous to the economy and the national kitty as a whole. These so-called rising stars of engineering marvels and employment distort the market by lobbying to curtail car imports thus denying the buyers their right to demand the greatest value for their money. Import restrictions could have been forgivable had these assemblers not acted as merely assemblers and had moved towards manufacturing or atleast had they really churned out good quality cars for the insane amounts of money they charge. Case in point - Suzuki.
And more than three decades on, they still prefer to call themselves an infant industry. Allowing unhindered import would remove this distortions from the market. These inefficient assemblers would be eliminated by the competition. While this may create unemployment to the extent of the numbers employed by these leeches, it would, on the other hand, also develop a healthy automotive market that would reduce the effect of that unemployment. The eyesore of the locally assembled cars would ultimately go away and buyers would become happier when they drive a Nissan Altima instead of a substandard Corolla, for example.