The Finance Ministry should allow commercial import of used vehicles up to five years old to break the monopoly of local assemblers, who increase prices of old models annually without any safety features in new cars, All Pakistan Motor Dealers Association (APMDA) Chairman H. M Shahzad said in his budget proposals for 2016-17.
In his budget proposals which were sent to Finance Minister Ishaq Dar, H. M Shahzad said, “Allowing commercial imports of used vehicles like Transfer of Residence Scheme, Gift Scheme and Baggage Scheme will be in line with the government’s policy of enuring documentation of economy and will generate 100 per cent more revenue for the government to expand its tax base.”
He said that the local assemblers are selling imported cars in the country instead of manufacturing. Only one assembler makes one or two vehicles in its plant, while most of the parts are being imported from Thailand, Korea, or China.
The APMDA chairman suggested that only the certified members of the APMDA should be allowed to import used vehicles on commercial basis for the sake of transparency of the trade.
The existing schemes for the imports of used vehicles are for the facilitation of overseas Pakistanis, it is recommended that in these schemes there should be no restriction of age limit for the import of vehicles, he said.
The APMDA chairman said there is no reduction in price despite the government pressure on car assemblers. The assemblers continue to fleece the common people in the shape of 100 per cent advance payment at the time of booking of a car while delivery may take three to six months.
They arbitrarily increase the price of their cars as and when they desire, which results in significantly greater financial burden on the common man while profit of the auto assemblers rises even more than in neighbouring countries, he said in the proposals.
The promised levels of deletions have also not been achieved, despite the passage of many years. It was also pointed out that in the present government’s tenure the exchange rate of Japanese Yen depreciated almost 40 per cent but the local assemblers have not given this benefit to the consumers in the shape of price reduction.
Decline in regulatory duty collection has been a huge revenue loss, the APMDA chairman said, and added that issuance of CGO dated 13-1-2009 had caused many problem. This notification has deprived the legal right to obtain the depreciation at 2 per cent per months on old and used vehicles of above 1800cc imported by overseas Pakistanis. This facility had been available for the last 30 years, but it was abruptly withdrawn.
As per the current SRO, the depreciation on the taxes and import value of used vehicle is at one per cent per month. The importers are already paying a high tariff rate on account of regulatory duty at 60 per cent on vehicles of above 1800cc (cars and jeeps) and devaluation of currency.
It should be noted that the local assemblers are not assembling cars of above 1800cc. The import of cars and jeeps above 1800cc will not affect the local auto assemblers, as they are charging an unfair profit on their smaller capacity vehicles.
The chairman said that the government should impose a fixed rate of duty on the import of used vehicles of above 1800cc as is the policy for used vehicles up to 1800cc which are already subjected to fixed rate of import duty. It would help the government check the revenue loss suffered due to arbitrary fixing of import duty and will help to eliminate the variation of taxes in all the ports of the country.
The amnesty scheme of March 2013 of the previous government had resulted in regularising 52,000 smuggled vehicles of all engine capacities without restrictions of age limit. Smuggling is done to avoid high rate of taxes and/or age restriction. To avoid smuggling in future, the government should review the current policy and reduce the tax rate and increase the age limit of used cars. This will make smuggling less attractive and also increase the government revenues substantially, he said.
In 2005-06 import of used vehicles was permitted after a long gap of 12 years. This was subsequently restricted to import of used vehicles of up to three years old in different schemes. As a result, he said, local assemblers have acquired a monopoly on prices and supply, and the freedom of choice of consumers has been severely restricted.