Increase in age limit of used car: PAMA facing split after govt decision

Pakistan Automotive Manufacturers Association (PAMA) is reportedly facing split after the government's decision to increase the age limit of used cars from three to five years and increase in depreciation in assessable value from 50 to 60 per cent.
According to reports reaching here in the Ministry of Industries and Production (MoI&P), a meeting of the Association, which was called to formulate a joint strategy against the government recent anti-local auto industry decisions, failed to evolve any joint strategy due to non co-operative behaviour of one of the members.
The sources said that the federal cabinet, according to the Rules of Business, ratified the decisions of the ECC, would review the decision regarding increase in depreciation in assessable value from 50 to 60 per cent as this is another hit on the local industry.
"Most of the ECC members wanted to increase the depreciation value from 1 per cent per month to 2 per cent per month, but the MoI&P blocked the proposal with the arguments that this will destroy the local industry which implies unemployment," the sources added.
Chairman Federal Board of Revenue (FBR), sources said, also sided with the MoI&P fearing that any such decision will have negative impact on revenue generation from the auto sector.
According to the notification issued in 2010 by FBR to amend SRO 577 of June 6, 2005, the value of tax up to 800 cc is $4400, up to 1000 cc $5500, up to 1300 cc $11000, up to 1500 cc $15400, 1600 cc $18700 and 1800 cc $23100 excluding jeeps.
For Asian makes value of depreciation was 1 per cent per month with the age bracket of 36 month or 3 years and the vehicles has to be registered one year its export which means that the age of imported used cars was 4 years.
Insiders in the Engineering Development Board (EDB) are of the view that the Board is quoting 2005-6 figures of import and local Original Equipment Manufacturer (OEM) production but avoiding to give the number of OEMS of different countries like China, Korea and Japan.
FBR, has rejected the proposals of EDB on different issues like power, import relaxation through different SRO, new entrants for OEMS in auto, etc.
EDB, which was constituted through a resolution in 1994 as an advisory body for development of the engineering bodies in terms of vendor industry and development of the local existing industry. However, the Board, according to analysts is playing far beyond from its actual mandate.
"EDB is trying to get the position of a regulator without any legal status for which MOI&P is trying its hard," commented another insider on condition of anonymity.
According to minutes of the ECC, obtained from the MoI&P, the ECC was informed on March 1, 2011 that the age relaxation would not have negative impact on the local industry. It was noted that when the age limit of cars under the baggage schemes was relaxed from 3 to 5 years and the condition of registration was dispensed with in the year 2005-06, the number of used cars imported under these schemes was only 38,499 units against the local production of 170,487 units.
According to documents presented by the FBR, increase in depreciation from 50 to 60 per cent is a loss of revenue as they are paying approximately 36 percent of tax on a vehicle.
For instance, Corolla 1300cc, which had been introduced in market in August 2008 at a price of Rs126,9000/- and now after 31 month of its launching with new features and new brand matching its price is Rs13,37,000 and paying Rs4,74,000 tax.
Interestingly, in case of 60 per cent depreciation recently approved by the ECC, an importer pays $11000 on 1300 cc new car. However, importers who are importing cars after buying documents from overseas Pakistanis and getting it vet by commercial sections of embassies will pay $4400 ( Rs 3,78,000) as tax on 1300 cc cars after 60 per cent depreciation.
Local industry believes that the ECC increased depreciation by 10 per cent to make the prices of imported cars affordable which implies that local industry's logic has authority that prices of cars have increased at the international level.
The ECC observed that there is no comprehensive transport policy in the county, therefore, stakeholders such as Ministry of Industries, Commerce, Agriculture and Board of Investment may review the issue involving private sector and make a comprehensive presentation to the ECC.
Minister for Industries and Production Mir Hazar Khan Bijarani, referred his current visit to Japan and his meeting with the management of Yamaha Company and their interests in Pakistan. Chairman ECC appreciated the efforts of Minister for Industries and suggested to invite the concerned Japanese party for further negotiation on this issue.