KARACHI: The Pakistan Automotive Manufacturers Association (PAMA) has strongly protested the government’s proposal to increase sales tax on locally manufactured passenger vehicles.

In a letter written to Finance Minister Shamshad Akhtar, PAMA Director General Abdul Waheed Khan stated that the Economic Coordination Committee (ECC) had reportedly decided to raise sales tax to 25% on cars with engine capacity above 1400cc or priced over Rs4 million.

Khan argued that this tax hike would further dampen demand in an already struggling auto sector, resulting in declining production, sales, and revenues. He pointed out that PAMA data shows a continuous drop in local automobile production and sales over the past five years.

DG PAMA warned that the tax increase would make locally made vehicles more expensive compared to imported used cars, which still have lower taxes. This would hurt Pakistan’s economy, consumer sentiment, and investor confidence.

“We request you not to further burden the local industry with an increase in the sales tax rate to 25%,” Khan urged Akhtar in the letter. Earlier discussions with industry representatives had already resulted in this proposal being turned down, he added.

PAMA has sought the immediate withdrawal of the tax hike, fearing a major hit to local manufacturing amid an economic slowdown. The association said it expects the higher tax rate to diminish government revenues, rather than raising an additional PKR 4 billion as estimated.

Copyright Business Recorder, 2024