Govt collects more revenues from local auto industry

General Karachi

Karachi: Local car and auto parts manufacturers have appealed the honourable standing committee of the national assembly on automobiles to crosscheck the facts on duties and prices of used imported cars and locally made cars from the industry instead of relying on figures provided by vested interests.

Members and officials of Pakistan Automobile Manufacturers Association PAMA and Pakistan Association of Auto Parts and Accessories Manufacturers PAAPAM while addressing a press conference said that commercial import of used cars is officially banned but instead of prosecuting the flouters of this ban, the government bodies, including the prestigious institution like FBR, are backing the criminals issuing forged and misleading figures.

Chairman PAAPAM Munir K. Bana said that the Federal Board of Revenue has wrongly claimed that age limit reduction of used cars may cost government kitty Rs 17 billion per annum, based on duties/taxes collected during 12 months of 201112 on approx 56,000 imported used cars. “In fact, the revenue generated by the government on similar quantity of vehicles manufactured by the local industry would have been Rs 21.5 billion, exceeding the levy on used cars by Rs 4.5 billion per annum an increase of 26%,” he added.

Citing an example DG he pointed out that on a Corolla manufactured in Pakistan the FBR gets government levies equivalent to $5568 while on similar imported car the total government revenue is only $4400.

Chairman PAAPAM further pointed out that the foreign exchange component of a Corolla car is $5400 while similar five years old used car is imported at $10682. “This means that the state not only loses on revenues but also in foreign exchange when any five years old car is imported,” he added. In case of three years old used car the duty component is higher at $7040 but the foreign exchange component is also higher at $11600.

He said that the OEMs and burgeoning Auto Parts Manufacturing industries, consisting of over 3000 SME units, who are the backbone of the auto industry and ensure uninterrupted supply of hi-tech auto parts for assembly of all kinds of vehicles, deposit around Rs. 80 billion per annum into the government treasury.

While sharing an example he said the local addition in Corolla is equivalent to $4400 per unit. “These parts are produced by local auto vendors that provide jobs to thousands of workers whereas in case of used car there is no local component and every component is made in a foreign country thus the jobs are created outside Pakistan,” Chairman PAAPAM added.

Muni K. Bana said that the above facts also belie FBR claims, where they state that no manufacturing exists in Pakistan and all auto parts are imported by assemblers from Thailand, Japan, etc.

“It is also unfortunate that the FBR has also not even mentioned the colossal foreign exchange losses suffered by the government, as a consequence of imports of used cars. It is a known fact that import cost of CKD for a new vehicle is lower than 50% of an average C&F cost of a used vehicle,” he added.

He said that based on this apparent gap, the import of 56,000 used cars in 201112 resulted in foreign exchange outflow of US$ 454 million as against US$ 218 million, that would have been incurred on similar quantity of CKD kits for local assembly of vehicles i.e. a saving of US$ 236 million.

DG PAMA Abdul Waheed pointed out that the used car import was allowed so that the consumers could get automobiles at low rates. However, the statistics prove that the prices of used cars are comparatively much higher or same as that of Pakistan made new cars.

“The price of brand new Pakistan made Corolla is $16900 while a five years old imported used car of same engine size is sold at $15100 and this small difference of $1800 is not worth driving a five years old car,” he said adding that a similar three years old car is sold in the local market at $18600. “Is it worth buying a three years old car at higher price than a brand new car,” he questioned

He further said that all the car manufacturers in Pakistan provide two years performance warranty of the cars they sell. Moreover they guarantee availability of all spares and repair of these vehicles at their dedicated workshops. In contrast, there is no warranty for the used cars.

He brought to the notice of the National Assembly Committee that while even 20 years old Pakistani models are still plying on the roads one would hardly see an imported used car surviving on our roads five years after import.

“This is simply because the spares of most of these cars are not available locally and whenever a used car breaks down due to want of spares they have to be imported by air,” he said adding that the spares are costly as they cannot be imported in bulk making the maintenance cost of these vehicles exorbitant.

Representative bodies of local OEMs and auto parts manufacturers said that It would be in the best interest of the government to encourage local auto industry, as both assemblers as well as APMs are fully documented industries and pay their fair share of taxes, besides providing employment to over 2 million persons. On the other hand, used car imports is not only a misappropriation of concessionary benefits meant for Overseas Pakistanis but it is a crime in the sense that the expatriates’ documents are misused to arrange commercial imports of vehicles in their names.

PAMA and PAAPAM also appealed the government to trace and bring all the used car dealers by into the tax net so that they become fully documented and pay their fair share of taxes. Used car dealers’ association should also be registered with Directorate of Trade Organisations, to prove who are the expatriates they represent and in what capacity have they been authorized to sell the cars gifted by them for their families’ personal use.