‘New’ taxes to hurt auto industry, national economy: experts

LAHORE: While the government has imposed new taxes on the auto sector through mini-budget to control the widening trade deficit, experts believed these taxes would prove detrimental to the local auto industry and may cause damage to the national economy.

Syed Zafar Ali, Auto industry expert said: “These new taxes would prove detrimental to the local auto industry and it would do more damage to the national economy.”

The government should control the import of used cars that is in full swing despite some measures by the government like SRO-52, he added. Some other experts believed the imposition of new taxes on the local auto industry will badly affect the local auto industry, as the sales will drop down and the government will miss the revenue with declined sales and worst effect expected roll back of investment plans by numerous auto makers.

As per official data, 27,451 used cars have been imported in the last calendar year that resulted in a huge loss of precious foreign exchange while it also took a heavy toll on localization.

“Pakistan is the only automobile manufacturer out of 40 countries where used cars are being imported through misuse of gift and baggage schemes. And for every used car imported in Pakistan, the local vendor industry loses 15 jobs and parts manufacturing business worth Rs 150,00 on an average,” Syed Ali Zafar said.

Apart from hurting industrialization, the import of used cars also results in flight of precious foreign reserves as Pakistan imported more than 350,000 used vehicles in the last decade with an average cost of $12,000 per vehicle. Similarly, an amnesty scheme on smuggled vehicles had resulted in a loss of Rs 43.728 million to the national exchequer, he added.

“The importers don’t care how detrimental the import of used cars is for Pakistan as it increases import bill, jeopardizes local auto industry with no employment generation,” Zafar reasoned.

It may be noted that the government directed beneficiaries of gift and transfer schemes to deposit duties in dollar amounts from the account through SRO-52 from January 2019. The SRO resulted in a drastic drop of used cars import in Pakistan as after the implementation of SRO-52.

Copyright Business Recorder, 2022