Islamabad: The Government of Pakistan has increased taxes on imported cars by Upto 500%. The action has been taken to preserve the domestic auto industry from foreign competition.
Commerce Additional Secretary announced the plan at a meeting of Public Accounts Committee (PAC). The committee member, MNA Noor Alarm Khan strongly recommended to reduce the excessive protection that helps the local automakers in skinning the purchasers.
Government economic policies ‘Protectionism’ restricts international trade to facilitate domestic industries as they are going out of business because of cheap imports. However,the goal behind the policies is to improve economic activities but they can also be applied for safety or quality concerns.
In a meeting Khan said, after the last meeting of the committee, the car manufacturers further increased the prices, however, these are not the car manufacturers but car assemblers.
Khan suggested that government should withdraw the status of “manufacturers” instead of calling them “assemblers”.
PAC member, Saleem Mandiwala said that if we reduce the tariff on the import of old vehicles and lower the duty protection from 500% to 400% even then they can still make a significant profit.
Later, the PAC chairman states that if the person is paying 100% in advance then there is no need to charge any extra amount with an increase in car prices. He further added that automakers will pay 10% duty instead of 35% by bringing the engine in three parts. Is it true that CKD kits are made in three sections to save taxes? In reply, the FBR officials stated that it is not determined by FBR but by the Engineering Development Board (EDB).
However, local assemblers enjoy 241% to 500% protection. Whereas previously the protection level was in the range of 100% to 390%. Memon Mujataba Special Secretary of Commerce gave his statement.
The PAC instructed the Ministry of Commerce and Industries to review the protection policy. And make a policy addressing the issue within one month. Companies will deliver vehicles within one month to the people who pay 100% payment in advance.
The Secretary told the committee that the companies would deliver the cars within 60 days of booking. If a company fails to do so will result in a 3% KIBOR charge. PAC chairman Noor Alam Khan said that if anyone is paying full payment in advance. Then why are the carmakers asking Rs.400,000 more from the customers. “under which law they are asking for money from people?
The Industry Secretary said that around Rs 217.6 billion is lying with vehicle manufacturers as advance payment. And that’s because of low demand, manufacturers are functioning at a low capacity. Hence the government advises car makers not to schedule bookings beyond three months.