Non-filers, carmakers brace for difficult road ahead

Industry says premium or ‘own-money’ menace will increase

KARACHI: With elections around the corner and a population that largely comprises non-filers of income tax returns, the auto industry is set to endure a substantial decline in sales. However, an equilibrium would be found in two to three months even as the budget measure remains in effect, according to an industry official.

The Finance Bill 2018 bars non-filers from purchasing and registering new vehicles, a move meant to encourage filing of tax returns, wealth declaration and increase revenue.

Automakers have already announced that they have stopped taking orders from non-filers this week. Additionally, non-filers would also be unable to have their new vehicles registered from July 1, the day the finance bill comes into force.



The move has been widely discussed with supporters saying the development was much needed as Pakistan struggles to increase the number of return filers. Critics, however, say non-filers will find a way out of the conundrum.

Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan said the market is divided equally among filers and non-filer, implying that sales could take a massive hit.

However, an industry official said the market would recover in two to three months, because a person, even if they are a non-filer, buys a car out of necessity.

The official said the credentials of a filer will now be used to purchase vehicles, which would increase the premium or ‘own-money’ amount.

However, he added that the industry was planning on following a certain SOP, and sell one car against one CNIC in order to contain the ‘own-money; issue.



Meanwhile, research analyst Hamdan Altaf of Taurus Securities said that the auto industry is expected to endure a sales slump in coming months in the aftermath of this issue.

“Roughly 50% of auto sector purchasers are non-filers. So, the auto sector is going to take a hit in their sales,” Altaf told The Express Tribune.

He further said that auto sales due to auto-financing would also drop gradually in the next one year as many economists are of the view that interest rates would increase by 100 basis points in the next four quarters. Before the end of May, the market is expecting an increase of 25 basis points.

Published in The Express Tribune, May 25^th, 2018.

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