Controversial move: NTN no longer a condition for buying a new car

Decision taken by newly appointed finance minister after a meeting with the automobile lobby.

ISLAMABAD:

In yet another retreat, the federal government has abolished the condition of having a national tax number (NTN) for purchasing a new car – a move which is contrary to the rhetoric of broadening an extremely narrow tax base and will undermine efforts to document the economy.

The decision was taken here on Thursday by newly appointed Finance Minister Saleem Mandviwalla after he held a meeting with the Pakistan Auto Manufacturers Association (PAMA).  The representatives of leading automobile manufacturers were also present in the meeting.

Talking to The Express Tribune, officials said a person could purchase a new car by simply showing his or her computerised national identity card (CNIC).

It is the second decision in recent months that had been taken to appease the influential automobile lobby. Earlier, the government reduced the age-limit for the import of used cars from five to three years. Sardar Ayaz Sadiq, a MNA from Pakistan Muslim League-Nawaz (PML-N), had alleged in a Public Accounts Committee meeting that the lobby paid Rs970 million in bribes to get this favour.



The move to abolish the condition of having an NTN is part of a series of controversial decisions which Mandviwalla has taken since he assumed the finance minister’s office. The decisions have come under heavy fire from various quarters.

The NTN condition had been imposed to capture those among the wealthy who do not pay taxes or file income tax returns. Under the law, anyone with an annual income above Rs500,000 is liable to file an income tax return.

Federal Board of Revenue (FBR) chairman Ali Arshad Hakeem defended the decision, saying many used fake NTNs to purchase cars in order to avoid tax systems. He added that the country would soon move towards using CNICs for all financial transactions – unlikely considering the FBR has already amended a law that was meant to convert CNICs into an alternative for NTNs.

Hakeem’s statement also suggests FBR mechanisms have completely collapsed by failing to catch those who use fake NTNs. It also highlights the need to acquire advanced information technology to improve these systems.

According to an official, Mandviwalla also held a meeting with Steel Melters Association on Thursday and asked the FBR to review the demand of reducing the sales tax being charged on every unit of electricity consumed by the industry.

Through the Finance Bill 2013, the government had increased the sales tax from Rs6.5 per unit to Rs7.5 per unit. In two subsequent moves, the government reduced the tax to Rs4 per unit – below the level of June 30, 2012 even – allegedly after a member of FBR took millions of rupees in bribes. Now the association is once again demanding further reductions besides seeking other relaxations.



While the government takes measures to appease lobbies, tax revenues have failed to show any significant improvant. According to the collection results for the month of February, the FBR has collected Rs140 billion – a mere Rs6 billion more than the figures for February last year.

The FBR chairman said that after the installation of new software aimed at cracking down on illegal sales tax refunds, there was an almost 52% increase in domestic sales tax collection in February as compared to the previous year. He said the figure will go up as the FBR has started a campaign against the textile industry.

Published in The Express Tribune, March 1^st, 2013.