The top taxman has issued a show cause notice to a foreign ambassador for allegedly importing a duty-exempted luxury vehicle and then selling it to a local businessman.
The show-cause notice – issued by the Federal Board of Revenue (FBR) on August 4 – told the recipients – including the businessman Basil Ahmed Affendi – that the vehicle might be permanently confiscated and they might also face penalties of up to 10 times of the value of vehicle.
This breach also carries punishment of up to three-year imprisonment.
“Ambassador, Embassy of the State of Palestine, Islamabad and Basil Ahmed Affendi are called upon to show cause as to why the seized vehicle should not be confiscated and why penal action should not be taken against them under section 156 for violations of the Customs Act,” said the show cause notice.
Both the persons have been asked to appear before the FBR on Tuesday.
The FBR seemingly has overstepped its mandate by directly sending the notice to the ambassador –a function that it cannot perform without taking the foreign office into confidence.
When contacted, FBR Member Customs Operations Dr Tariq Huda said the FBR is devising a mechanism to stop misuse of the duty-exempted vehicles policy by the foreign diplomats.
To a question on serving show-cause notice to an ambassador, Dr Huda said the diplomats enjoy immunity under the Vienna Convention. The Vienna Convention is blatantly misused in Pakistan amid silence of the foreign office for illegal sale of duty-free vehicles.
Some car dealers have created Facebook pages to advertise their smuggled and duty-exempted vehicles.
If a luxury vehicle is imported through normal channels, it is subject to 100% customs duty, 70% regulatory duty, 7% additional customs duty, 30% federal excise duty, 17% sales tax and 12% withholding tax, bringing total taxes to 236% of the import value of the vehicle.
The actual duties impact comes to 360%.
Last month, the Pakistan Customs seized nine very expensive vehicles that were imported by foreign diplomats – including the Palestine ambassador – but were in the use of private persons.
At the prevailing taxes and duty rates, the estimated tax evasion in 16 such cases is Rs444.6 million, which indicates how pricey the vehicles are.
Mercedes Benz, Lexus LX570, BMW X7 series, Land Cruiser ZX, Nissan X Trail, Toyota Crown and others were imported duty-free by availing diplomatic exemptions and handed over to private persons without fulfilling legal and regulatory requirements.
The vehicles had been seized by the Model Customs Collectorate of Islamabad.
The diplomats working for embassies of the United Kingdom, Bahrain, Jordan, Saudi Arabia, Bangladesh, Kenya, the United Nations, Palestine, Russia, Cuba and Tajikistan imported these luxurious vehicles.
The Palestinian Mission imported a 2019 model BMW X7 and a Land Cruiser ZX by enjoying an exemption in duties respectively of Rs58.2 million and Rs18.4 million.
The FBR, however, recovered the 2019 model BMW X7 luxury vehicle from Multi Professional Cooperative Housing Society in Sector E-11 of Islamabad during a raid. It was in the possession of Basil Ahmed Affendi.
The possessor of the vehicle failed to produce any import, auction or amnesty documents on the basis of which the vehicle got registered in the concerned motor registration authority.
The FBR report said the Pakistan Revenue Automation Ltd (PRAL) data confirmed that the vehicle was imported by the ambassador under an exemption certificate, issued by the FBR in December last year.
The possessor has so far failed to produce any import documents of the vehicle despite issuance of notice under the Customs Act of 1969.
The show cause notice said, “It is crystal clear that BMW X7 jeep ,Model-2019, was imported under the diplomatic immunity by ambassador of the State of Palestine, Islamabad, under the exemption certificate, issued by the Model Customs Collectorate Port Qasim, Karachi” .
The clause 10-A of the section 156 (1) states, that “such goods shall be liable to confiscation and the person to whom the exemption was granted shall be liable to a penalty not exceeding ten times the value of goods; and upon conviction by a special judge he shall further be liable to imprisonment for a term not exceeding two years”.
Under the clause 14, such person shall be liable to a penalty three times the value of the goods. Upon conviction by a special judge, he shall further be liable to imprisonment for a term not exceeding three years, or fine, or both. Under clause 90, penalty is 10 times of the value of the good.
The FBR believes that the vehicle was liable to confiscation being non duty paid.
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"The possessor of the vehicle failed to produce any import, auction or amnesty documents on the basis of which the vehicle got registered in the concerned motor registration authority." - So what action is being taken against the officer(s) who registered the vehicle without these documents???