Duty on car imports unlikely to generate much revenue

Industry believes import of new cars hardly enough to have any impact

KARACHI: The automobile industry believes the government may have succeeded in reducing some import of new vehicles, but it may not be able to generate enough revenues by increasing the regulatory duty on the import of cars.

“I don’t think the government will be able to generate even Rs1 billion by increasing the duty because the country hardly imports 1,000 new cars per year,” All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad said.

To control the growing import bill, the government on Tuesday enhanced the regulatory duty by up to 350% on 356 essential and luxury items.



Pakistan’s import bill has crossed $53 billion at a time when the country is unable to even sustain its exports, resulting in a ballooning trade deficit of $32.6 billion in fiscal year ended June 30, 2017.

“Government’s measures will not impact used car imports,” said Shahzad.

Analysts say Pakistan does not even import 1,500 brand new vehicles annually. However, the country imported about 65,000 used cars in FY17 compared to about 56,000 units in the previous year.

Since the government did not take any drastic measures against used car imports by enhancing the regulatory duty, the whole activity would not significantly impact the market. Local car manufacturers say they are still analysing the impact of duty increase, but generally it would not impact the domestic industry.

Similarly, auto part manufacturers say new duties would not impact them, though they are examining details of the government decision.  Since the import of new cars was very low, new duties would not impact car importers significantly, a leading auto part manufacturer commented.

“The government can only control the import bill by enhancing duties on used cars, otherwise it is all useless,” he commented. The commerce ministry had estimated the additional impact of the regulatory duty at over Rs22 billion. However, due to the inclusion of vehicles, the collection may increase.



Since the government charges sales tax and withholding taxes by including all kinds of duties in goods prices, the total impact of the change in duty rates will be over Rs40 billion, according to FBR officials.

Authorities are estimating that the additional duties may help contain imports from around $300 million to $400 million during the current FY.

Published in The Express Tribune, October 19^th, 2017.

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