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FBR collects Rs 4.5b extra thru levy on local car sale

11 December, 2012

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.

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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 26pc).

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higher than contribution of imported used cars due to concessionary duty structure for vehicles import, laid down in an outdated SRO 577 of 2006, as 33pc of selling price of every locally assembled vehicle contains government duties and taxes.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 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 2011-12 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 has not even taken into consideration the revenue contributions of Auto Parts Manufacturing (APM) industries of Pakistan.

Auto industry representatives said 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 autoparts 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 50pc of an average C&F cost of a used vehicle. Based on this apparent gap, the import of 56,000 used cars in 2011-12 resulted in foreign exchange outflow of $454 million as against $218 million, that would have been incurred on similar quantity of CKD kits for local assembly of vehicles i.e. a saving of $236 million.

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.

End.


 
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