Motor vehicle tax: For the govt there is nothing certain in life, except death and evading taxes

Excise & Taxation records show that the government itself is the biggest defaulter when it comes to paying its taxes.

Mahnoor Sherazee August 04, 2011


They’ve got fast cars, and they’ve pulled a fast one on the tax collectors.

The Sindh government has 32,000 vehicles registered in its name, and is required to pay motor vehicle taxes (MVT) on them. However, Excise and Taxation department records show that the government is among the highest defaulters in paying the MVT in Karachi.

The government pays barely 30% of the tax it owes, leaving a whopping 70% as bad debt. The pattern is mirrored by private citizens; however those eligible to pay the tax on commercial vehicles are more diligent with their payments. Karachi has a total of 1,248,359 registered vehicles.

According to taxation department officials, the police and the Karachi Water and Sewerage Board lead in bad debt. The police owes about Rs50 million and the water board’s outstanding dues total around Rs1.5 million. The board managed to pay Rs4.5 million of its debt last week.

Assistant excise and taxation officer Ziauddin Shah explains that there is no proper mechanism for the recovery of dues, until the vehicles are being sold or transferred to another custodian. The same principle applies to government-registered vehicles.  But government departments that are racking up debts have a different take on the issue. According to a senior police official who spoke on the condition of anonymity, the police department has about 6,000 vehicles.

This fleet includes 2,000 four-wheelers which are not registered with the excise and taxation office (ETO). “The government wanted to simplify matters so instead of giving us the budget and then have the department pay the taxes, they simply adjust the books - taking the required amount from the budget at its onset,” the police official explained.

But while the books are being adjusted, the money received just doesn’t seem to be adding up.

Taxes applicable on most vehicles registered to the government have not been paid for years, says an official at the ETO. “In many cases vehicles sanctioned to government officials just fix the ‘Applied for Registration’ plate and roam around freely while not paying the tax for years.”

“No one really pays taxes here,” a senior official said by way of explanation. He offered a personal example. “The car allotted to me by the water board has not been registered yet. So the police would stop me because of the AFR-2011 plate. Eventually I just made a green AFR-2011 number plate and now no one bothers me.”

The water board has 523 vehicles allotted to it, which includes 80 motorcycles.

It forks out tax payments - but only when push comes to shove. “When there is a lot of pressure on us, then a few top officials take some money out of their budget and pay part of the amount. But there is no regular procedure to clear our dues,” the official explained.

While government employees easily manage to evade taxes - such as the industrious official with a green AFR plate - the tax department struggles to recover the money it is owed.

“Each year we have to run at least two to three week-long campaigns to get some of the unpaid motor vehicle tax,” said Shah. “In our last campaign, which was held this April, we managed to extract about Rs4 million. But this amount was just from impounded vehicles and does not include government-registered vehicles.”

Given the low amounts recovered, the excise and taxation department seems to have found a creative way to turn its losses into successes. The department set a three-billion-rupee goal for tax collection in 2011. Official records show that Rs2.2 billion was collected as of this May. Simply put, this equals a 71% recovery with half the year remaining. This calculation can possibly mean one of two things - its officials need a better grasp of mathematics or the department is deliberately keeping estimates low so it can later show a successful rate of recovery.

It is all a matter of circular debt, said one official. According to him, the Centre owes the water board around Rs9 billion, an amount which has accumulated over the years. “How can we pay others when we have not been paid?”

Published in The Express Tribune, August 5th, 2011.