Some quarters believe that the import of used cars is the answer to providing affordable cars for local consumers. They also seem to suffer from the misconception that this will create an environment of healthy competition and will ensure a steady supply of quality and reasonably priced cars to the local market.
On the other end, the government has still not recovered from the embarrassment of allowing import of five year old cars in order to provide cheaper vehicles to consumers despite the fact that most of these vehicles are priced at the rates of locally made new cars. It appears the tax-evading mafia lobby is at its dirty tricks again and has mustered the courage to further enhance the government’s embarrassment by demanding additional relaxation on commercial import of used cars of up to 10 years old which could prove suicidal for Pakistan’s already precarious economy.
The used cars dealers lobby propounds the faulty theory that the import of used vehicles would be beneficial for the government as it will expand the tax net and add to the tax base. It is unfortunate that this lobby ignores the fact that such an approach to fiscal policy would fatally harm the local auto industry and cause huge dent in the national economy.
These short-sighted elements are also of the view that commercial import of used cars of up to 10 years age would generate revenue for the national exchequer. They ignore the tremendous manner in which such a move would upset auto parts vendors and car makers.
In reality the local auto industry has been greatly beneficial for the local economy – a fact that cannot be over-emphasiszed. The importance of the local auto industry can be gauged from the contributions that the auto sector has made to the national economy, which amounted to more Rs60 billion during 2010-11 whereas passenger cars and the LCV sector contributed Rs40 billion during 2010-11 out of a total FBR collection of Rs 1,558 billion.
It needs to be understood very clearly that import of used cars will cause immense damage to the local industry and will also result in depletion of valuable foreign exchange through dumping of junk cars in the country. The signs of revenue loss are already visible as the Government of Pakistan has lost almost 715 million rupees between January and October, 2011, by allowing used car imports compared to what it could have earned in shape of dutys and taxes from local CKD car sales. The local car market in Pakistan is flooded with imported used cars and their prices are extremely high compared to their age. The alarming increase in the import of used cars is expected to reach around 20,000 units by the end of this year. The majority of imported used cars are in the 1300 cc range and above, which clearly falls in the luxury segment. Out of the 16, 620 used cars imported so far this year, 55 per cent% were in the 1300cc and above luxury cars category, 38 per cent in the 1000 cc cars segment and a mere seven per cent in the 800cc cars segment.
According to media reports, PAMA officials have stated that mostly luxury cars are being imported under the used cars import facility which is depriving the government of valuable foreign exchange. The payments for used cars are made through illegal channels commonly known as “Hawala” in the market which makes it difficult for State Bank to even track this money laundering. The government definitely has all the information in this regard and should have reprimanded the dealers who had earlier assured that the prices of used cars would be much lower so that ordinary consumers would benefit from the facility. Allowing commercial import of used vehicles is not only unfair to the unfortunate consumer but is detrimental to the local auto industry, which has invested millions of rupees over the past decade and has been a source of gainful direct and indirect employment for millions of people.
The writer is a media
and marketing professional