Muhammad Nadeem Bhatti
Pakistan is among the group of 40 countries in the world that produce automobiles. Its booming population of 180 million and 9th largest labor force has a huge potential to grow and achieve economic prosperity with right and focused policies for its economy. Auto industry is referred to as “industry of industries” in the developed world. The auto industry of many regional countries has played a pivotal role in transforming those countries into economic tigers. It is common to face difficulties when you are in the market to buy an imported car in Pakistan. Japanese used vehicle exporting is a grey market international trade involving the export of used cars and other vehicles from Japan to other markets around the world since the 1980s.
Despite the high cost of transport, the sale of used cars and other vehicles to other countries is still profitable due to the relatively low cost and good condition of the vehicles being purchased. Nearly 1.4 million used vehicles were exported from Japan in 2006.The most popular destinations for used cars from Japan are Mozambique, Sri Lanka and Pakistan. It is observed that auto sector is among the top 5 contributors to Pakistan’s tax revenues and has skilled work force of 3 million. Different global vehicle brands are operating in the Pakistani Market and all 5 sub-sectors of auto industry are being locally produced that include passenger cars, light commercial vehicles, tractors, buses, motorcycles and trucks even their OEM parts. The production data analysis of all the subsectors revealed that the growth of production has remained negative over the period of 2006-07 to 2013-14. At the same time the imports of Pakistan in auto industry has increased, Pakistan applies strict controls on imports. Imported cars must be not more than three years old. High import taxes are levied on imported vehicles. Special ships are sometimes used for exporting vehicles to Pakistan to meet the rising demand. Customs duties are levied on ad-valorem basis. Pakistan’s overall average applied tariff in 2018 was 10.09 percent. In the 2018 budget, the government reduced the maximum general tariff rate from 25 percent to 20 percent (except for vehicles) and simplified the tariff structure by reducing the number of duty brackets from six to four. Other than customs duty, the government charges 17.0 percent sales tax on the duty paid value of a variety of goods produced in or imported into the country.
International trade increases the number of goods that domestic consumers can choose from, decreases the cost of those goods through increased competition, and allows domestic industries to ship their products abroad. While all of these effects seem beneficial, Free trade isn’t widely accepted as completely beneficial to all parties. Increase in import duties increase the prices of imported goods. Because of this, domestic producers are not forced to reduce their prices from increased competition, and domestic consumers are left paying higher prices as a result. Which reduce efficiencies by allowing companies that would not exist in a more competitive market to remain Open. Pakistan has received $21.84 billion in remittances sent home by overseas Pakistanis in the fiscal year ended June 30, 2019.The inflows are 3%, or around $640 million, higher than the set target of $21.2 billion for the year. To make it even more better the government should make easy and simple policy for remittance. The government one car import policy for the people living abroad is not only affecting the business but also affecting the economy of Pakistan. Government should allow people to buy more than one car. It will not only profit the importer but also country economy. And the policy for sending money by only one channel (banking account) is also not very effective. Government should allow or make other means for the people to send money through any other legal channel. As long the money is coming in the country by any legal channel it is not only good for the people but it will also help in bettering the economic growth and remittances.
The Federal Bureau of Revenue has issued a notification of the imposition of new taxes following the passage of the budget for the fiscal year 2019-20. Although the renowned companies of motor developing has stopped their work and stop over export processing. Recently 15,000 skilled people have been dropped out of this existing industry. So the existing rate of growth has been turned turtle. Automatically it has been effect by the production policy of nation and the working capacity of country fully unbalanced.
Pakistani nationals residing abroad including dual nationals can import old and used vehicles into Pakistan under the following three schemes: Personal Baggage, Gift Scheme and Transfer of Residence. Cars not older than 03 years and other vehicles not older than 05 years can be imported under these schemes. The structure of duty and taxes under these 03 schemes remains the same.
The minimum duty amount to be paid for any smaller car is 4800 US $. Which can be increased up to 27940 US $ as the model or the engine capacity increases. But here is good news for Pakistani expatriates around the world. You may soon be allowed to import one hybrid car to your home country tax free upon presenting proof of remitting $100,000 using legal banking channels within two years. This move will not only benefit the overseas Pakistanis but will also help improve foreign exchange reserves in the country, currently facing acute financial crisis. According to policy a person can send remittance by his own bank account to receiver of local bank account holder. The duties and taxes are the backbone for any economy, but if you increase it you also become the reason of high rates. So the above mention import system collapse. The auto industry in Pakistan is producing all kinds of vehicles. If it is given hundred percent access to domestic market by discouraging import/smuggling of used vehicles and a long term policies for continuity and stability is implemented it can also perform like the auto industries of regional countries.
—The writer is an entrepreneur & senior economic analyst (Chairman) Federation Pakistan Chamber, Garment Industry Committee, Small & Medium Industrial Association Bund Road Lahore and Pakistan Columnist Council Lahore Pakistan.
