Government to lose revenue, forex for relaxation on used cars imports

The relaxation announced by the federal government in the import policy of used cars would be misused by the elite class at the cost of foreign exchange reserves and revenues in terms of taxes and duties, according to stakeholders here.
They believe that a strong influential lobby of ruling elite is busy with connivance of some officials to mislead the government and have almost managed to convince the Prime Minister that allowing used cars imports against Auto Industry Development Plan (AIDP) would benefit the consumers giving them choice and bringing the prices of locally made cars down while import of luxury cars such as SUVs, etc, should also be allowed under the decision recently made. Though the Federal Board of Revenue and the Ministry of Finance have both disagreed with the idea, final decision is to be taken by the ECC in its next meeting.
As per details, when the import of five-year old cars was allowed in 2005-07, only two categories were imported in large numbers, ie 1000cc and SUVs of over 2500cc, specially Prado. The trend clearly indicated that the policy to relax old car imports would benefit the elite class which may save up to Rs 2-4 million in terms of depreciation allowance while the national exchequer would be deprived of duties due to misdeclaration, etc.
An economist said that the decision to allow reconditioned luxury automobiles up to five-year old would not only be a burden on the country's import bill, it will also eat away precious foreign exchange of the country.
Giving depreciation facility on the import of luxury items means to encourage imports of luxury car, a trend which was condemned by former finance minister Ishaque Dar in his brief stay in the Q block, Islamabad. The government, however, seems geared up to benefit the influential people as it is now looking for relaxing the age limit of SUVs and luxury cars in its parallel policy of passenger car imports.
For the last couple of years, as heavy duties were imposed on luxury automobiles, their imports were limited, though did not stop. Prices of luxury automobiles range from Rs 6 million to more than Rs 10 million. Allowing depreciation allowance on same would mean a saving of Rs 2-3 million, which is actually the loss of revenue, and foreign exchange.
Punjab government had lifted duties on luxury cars equal and above 2,000cc in June 2010, which showed the intention to support influential people of the country despite the fact that the provincial government was not paid Rs 600 million in terms of duties on luxury automobiles, mostly by parliamentarians and cricket stars, when the duty was imposed. The amount of tax stood at Rs 100,000 on vehicles up to 2000cc and Rs 300,000 on 3000cc and above vehicles.
Land Cruisers, Mercedes Benz and BMW cars are the favourite of MNAs and MPAs of the country. Economists believe that the decision is not conducive at a time when the government is campaigning for 'RGST' to fulfil IMF conditionality for the $11 billion tranche. Allowing luxury vehicles for influential class, particularly parliamentarians, after waiving taxes does not sound sensible.
Policymakers of the government are looking for IMF grants keenly, but are reluctant to contribute to the economy, in terms of taxes and duties. In the past, it was observed that the reconditioned luxury automobiles were imported in significant number following government's relaxed import criterion.
The government has recently allowed import of up to five-year old used cars aimed at creating competition in the local market to reduce the dominance of local manufacturers. Though, imported cars have been taxed to protect local industry, the decision is not conducive for economic indicators because it will add a burden on the country's import bill more than the competition factor.