‘Amnesty scheme could expand grey market of vehicles’

CCP asks govt to withdraw forthwith tax amnesty for smuggled vehicles.

ISLAMABAD: The anti-trust watchdog has asked the government to immediately withdraw the tax amnesty scheme for smuggled vehicles, terming the policy a violation of competition laws besides becoming a source of expansion of grey market in the country.

In a policy note to the federal government, the Competition Commission of Pakistan (CCP) highlighted flaws in the recently announced policy of legalising smuggled vehicles by paying comparatively less taxes. It said the scheme has placed both the importers of used vehicles and assemblers of new cars at a disadvantage.

The action is a signal to the consumers that the government introduces motor vehicle amnesty scheme from time to time, as it has done in the past, it said. “This may result in a creation of grey market for automobiles in the country on a sustained basis.”



The existence of grey market will act as a parallel market of vehicles and create unfair competition for the formal sector, the CCP added.

“People who have violated the law by not paying taxes and duties have been incentivised to import motor vehicles of their choice without imposition of any allowable age restriction on them,” it said.

Many have viewed the Federal Board of Revenue’s move as a political decision aimed at facilitating influential people to make money by legalising the vehicles brought illegally into the country.

“It is recommended that the policy may be reconsidered and withdrawn or suitably amended to eliminate discriminatory treatment resulting from the Statutory Regulatory Order (issued to give effect to the scheme),” said the CCP.

The All Pakistan Motor Dealers Association (APMDA) has already raised voice against the scheme.

The facility is limited to only smuggled vehicles and is not applicable to the import of vehicles via a customs station in violation of the Import Policy Order and the vehicles which have been auctioned.

The age limit for import of a car is three years, but there is no age limit for smuggled vehicles, which is anti-competitive, said the CCP.

The commission was of the view that due to the amnesty scheme, dissimilar conditions have been applied to the importers of motor vehicles through normal channels in contrast to persons getting their smuggled vehicles cleared.

The amnesty scheme is also likely to affect the production decisions of automobile assemblers-cum-manufacturers, said the CCP. The automobile industry of Pakistan is inward looking and they plan their production decisions on domestic demand forecasts.

Market forecasts may change due to a surge in import of older motor vehicles, which may adversely affect the competitive environment for the automobile sector as some of the vehicles cleared under the scheme act as a substitute to the vehicles assembled in the country.

The smuggled/non-duty paid motor vehicles to be cleared under SRO 172(I)/2013 will not be subject to several tests such as roadworthiness and emission control as no criteria for allowable age limit have been set for clearance of the smuggled vehicles, said the CCP.

On the other hand, the vehicles imported through regular import channels are required to undergo roadworthiness test.

Published in The Express Tribune, March 15^th, 2013.

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