Car purchase by non-filers: government unlikely to withdraw condition

The government is unlikely to withdraw a condition barring non-filers from purchasing new motor vehicles despite immense pressure from different quarters, a senior official told Business Recorder. Pakistan Automotive Manufacturers Association (PAMA) fears a sudden drop in the sale of automobiles, following newly inserted section 227C in the Income Tax Ordinance 2001 that restricts non-filers from purchasing motor vehicles.
"The condition imposed in the federal budget for 2018-19 restricting non-filers to buy new vehicles would frustrate the new entrants and would also shrink the annual sale of locally manufactured cars resultantly the sales would decline by nearly 32 percent," said the association.
With this step, the economy will suffer revenue loss of Rs 100 billion per annum whereas 1.8 million families will be deprived of jobs, besides leading to a reduction in market size of 200,000 units per annum. The Association has proposed that the government refrains from sudden policy changes. In case of unavoidable circumstances, the implementation timeframe allowed must be at least two years or a gradual increase of withholding tax rate for non-filers for the next five years that will encourage citizens to file tax returns.
This decision will motivate filers to buy vehicles and sell to non-filers at a hefty premium. It will likely slow down upcoming fresh investments and may lead to a loss of investor confidence in the Pakistani market. According to the official auto industry maintains that their clients living abroad will also be effected b6y this policy decision. The government argues that Pakistanis living abroad can just fill a simple form available on the FBR website with nil assets and buy a car.
"We are facing severe pressure from the auto industry but I don't think the decision announced in the budget will be reversed. We have taken some measures to broaden the tax net in the budget and purchase of cars by only filers is one of them," he added.
In reply to a question, the official said that the government may withdraw health levy on tobacco at the rate of Rs 10/kg as it is feared that this step will hit tobacco growers directly. Members of federal cabinet have submitted the following observations: (i) reduction in GST on urea to promote agriculture sector; (ii) allocation to Bait-ul-Maal be raised to Rs 12 billion to ensure mainstreaming of marginalized segment of the society; (iii) appropriate funds be allocated to much-delayed Chashma Right Bank Canal irrigation project at Dera Ismail Khan and development schemes of Bannu; (iv) development schemes pertaining to infrastructure, education, and water supply of district Loralai be included in PSDP; (iv) allocation to minorities be earmarked in allocation of Bait-ul-Maal; ( vi) Universal Service Fund be created to promote alternate resources of energy in the country. Clean energy levy be imposed @ 1per cent on import of fossil fuels to finance it and pave the way for access to international service funds; (vii) health levy on raw tobacco @ Rs 400/mound be abolished as it would burden the farmers; (viii) allocations be made for establishment of a campus for women at Hazara university at Jabba, district Mansehra, establishment of regional office of Bait-ul-Maal in Mansehra, establishment of Interfaith Dialogue centre, establishment of Quran Complex and recycling of oil copies of Quran project; and (ix) funds be released to ERRA for reconstruction of roads, bridges, hospital, schools and water and gas schemes damaged due to earthquake in Balakot and Mansehra cities.
During ensuing discussion, Prime Minister Shahid Khaqan Abbasi directed the Finance Division to consider the proposals floated by the various cabinet members during discussions while approving the budget 2018-19. "We have discussed budget related matters with all the federal ministers individually and some minor adjustments will be announced in the federal budget wind up speech by the Finance Minister," he maintained.