Industry disproves FBR claim of revenue loss due to cut in age limit

LAHORE: Belying the FBR claim of revenue loss of Rs 17 billion due to cut in age limit of used cars, the auto industry has pointed out that loss linked to unabated arrival of used cars is more colossal.

They said that 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%.

They said that contribution of the local industry to the government kitty is always far higher than contribution of imported used cars due to concessionary duty structure for vehicles import, laid down in an outdated SRO 577 of 2006, as 33% of selling price of every locally assembled vehicle contains government duties and taxes.

They said that commercial import of used cars is officially banned, and instead of prosecuting the flouters of this ban, the government representatives are backing the criminals issuing such miscalculated figures.

It is to be noted 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, in future, based on duties/taxes collected during 12 months of 201112 on approx 56,000 imported used cars.

Industry sources said that FBR claim of losses of revenue due to lower imports of used cars are not supported by facts. In fact, over and above this understatement, FBR do not even taken into consideration the revenue contributions of Auto Parts Manufacturing APM industries of Pakistan.

Auto industry representatives say that the above savings on local assembly of vehicles of Rs 4.5 billion do not include additional revenues deposited into the government treasury by the burgeoning APM 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. It is estimated that APMs’ annual revenue contributions to the exchequer exceed Rs 15 billion per annum, which is the icing on the cake for the government.

Apparently, 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. 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.

Needless to mention, foreign exchange resources are the life blood of a country, and this is being drained away through import & sale of tampered used cars, by misleading the gapless public and lack of consumer awareness campaigns by responsible government officials.

All the above facts and figures are available on the government records and government officials should be restrained from making irresponsible statements. 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.

Furthermore, all the used car dealers should be traced and registered by the tax authorities, so that they are brought into the tax net, become fully documented and pay their fair share of taxes. Used car dealers’ association should also be registered with Directorate of Trade Organizations, 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.