The Excise Taxation and Narcotics Control Department (ET&NCD) Punjab has proposed the removal of ‘luxury tax’ on the import of vehicles, as it seeks to bring the rate at par with other provinces, The Express Tribune has learnt.The luxury tax is meant to discourage the import of vehicles, stop the outflow of foreign exchange and encourage the local industry by making the imported good expensive.However, Punjab’s department feels that the difference in tax rates encourages consumers to get vehicles registered in Islamabad, bypassing the provincial authority altogether and resulting in “no tax” at all.“Due to lesser registration rates and quarterly token tax payments, majority of the imported vehicle owners prefer ET&NCD Islamabad, instead of Punjab that takes yearly token tax payments,” said officials.“ET&NCD Islamabad has always offered lesser registration charges than Punjab’s taxation department, however, the gap abnormally widened after the ‘luxury tax’ was imposed on imported vehicles that have an engine capacity of over 1,300.”According to details under Section (10) of the Punjab Finance Act 2016, a new kind of tax was imposed on the import of vehicles over 1,300cc from June 2016. As per the taxation policy, owners of these imported vehicles would pay Rs70,000 for a vehicle over 1,300cc, Rs150,000 for a vehicle over 1,500cc, Rs200,000 for 2,000cc and above, and Rs300,000 for a vehicle with an engine capacity of over 2,500cc.This amount is other than the customs duty, token tax, income tax, professional tax, registration fees, and withholding tax already charged from owners who import vehicles. The department officials revealed that the matter was discussed in several meetings, adding that it also considered fining vehicle owners who had the car registered in other provinces. According to Motor Vehicle Ordinance 1965, if a vehicle stays in a province for a period exceeding 120 days, it shall apply again for ET&NCD for registration.It was discussed that through an aggressive crackdown vehicle owners can be pushed to again register with the provincial excise department. However, the strategy was discarded.The proposal to reconsider luxury tax is under deliberation with Tax Reforms Unit under the Finance Department. He said that the reduction in tax rate would only benefit the province by increasing the number of registrations, thereby adding to the revenue of the Excise Department.Published in The Express Tribune, May 18, 2017.Like Business on Facebook , follow @TribuneBiz on Twitter to stay informed and join in the conversation.