Automakers slam proposed tax on new cars

The Pakistan Automotive Manufacturers Association (PAMA) has said the recently proposed five percent withholding tax on the automobile industry would raise prices of cars by thousands of rupees and cause further decline in automobile sales in subsequent months, a report in a private newspaper said.
In a statement, director general of PAMA Abdul Waheed Khan has opposed strongly the move, saying the new proposed fiscal measures would hit the auto industry hard, which is already struggling to recover from its significant sale drop in the past two years.
“The auto industry, which contributes two percent to the gross domestic products of the country, does not expect such harsh measures from business friendly government as it would result in sharp decrease in sales,” he said, adding that this will also cease the new expected investment in the industry and the current automakers would consider reducing the numbers of their skilled workforce. “Local auto industry has long been the victim of unfavorable policies, including import of used cars and the amnesty scheme. No prudent government would like to follow in the footsteps of previous governments, which failed to formulate investor-friendly policies, and in fact sidelined local manufacturers and vendors,” he added in the statement.
He said that the cumulative sales for ten months of financial 2012-13 fell 24 percent year-on-year due to huge influx of used cars that clocked in at 55,000 units in financial 2011-12 and 40,000 in ongoing fiscal 2012-13 till April 2013. “The amnesty scheme to register smuggled cars further worsens the situation,” he said.
He further said that the industry’s production slowed down against its capacity in the last two financial years and now the new taxes will put further the sustainability of the automobile sector companies in crisis. Hence, the sales and revenues will not be maintained for longer period, he added.
In the same statement, Pakistan Association of Automotive Parts Accessories Manufacturers Chairman Munir Bana said the auto industry provided direct and indirect employment to around 200,000 skilled and unskilled workforce, but hundreds of skilled technicians lost their jobs at the dozens of small and medium sized vending units of the automobile industry due to significant drop in cars demand.
He urged the government to avoid new levies on the automobile industry in the larger interest of the nation and restore the confidence of foreign and local investors. “The government should give a lease of life to automobile industry, which has been providing livelihood to millions of people directly and indirectly,” he said, adding that if the automobile industry grows the revenues of the government, investment inflows and job generation will increase by leaps and bounds automatically in the future.