The new initiative of restricting non-filers from purchasing motor vehicles to cause a reduction in the sale of 240,000 units

ISLAMABAD: As the government, in its initiative of increasing number of filers has restricted the purchase of new cars by non-filers, however, car assemblers/manufacturers have urged the government to review its decision as the same will cause a drastic reduction in automotive sales.

Pakistan Automotive Manufacturers Association (PAMA) has suggested some changes in the budget that could otherwise gravely harm the auto industry if not addressed immediately.

In a letter written to the Finance Minister Miftah Ismail, PAMA Director General Abdul Waheed Khan has highlighted the issue of new restriction saying that the new section 227C in the income tax ordinance that restricts non-filers from purchasing motor vehicles, will affect the sale of vehicles in the country.

“Presently there are about 1.2million filers, as this new condition would be put into effect, only filers would buy vehicles which would result in a sudden drop in sales,” said PAMA DG. “Assuming a filer buying vehicle once every five years, the yearly sales are expected to go down to about 240,000 units, against the current annual projected figures of 350,000 units,” he added.

He went to great lengths and said “We understand that if the filer condition stays all industry volume projections to 550,000 units, under the Auto Policy 2016-21 would be lost. The new entrants would see this new condition alien to the auto policy, to the word of which, they responded and invested in our market. All those big names presently heading to our market would frustrate with this new condition and would lose their confidence in our policies.”

“Besides major adverse consequences to the industry the new condition would also be counterproductive; government losing the revenue of second highest revenue paying industry,” said Abdul Waheed Khan adding that the market mechanism would indeed come into play to defeat the intent of the new condition result in opening the avenues of misuse and diluting its impact.

Meanwhile, PAMA DG suggested a scheme that would help the government to bring non-filers in the tax net. He proposed different tax rates for filers and non-filers for the next five years encouraging the citizens to file tax returns to pay comparably less tax on passenger cars and commercial vehicles (trucks/buses). “This idea may be carried further to tighten the noose of non-filers, purchasing the automobiles, by gradually increasing the amount of advance tax, under section 231B of the Income-tax ordinance, for non-filers and simultaneously decreasing this tax for the filers,” he added.

PAMA DG further said that “We find no merit in imposing the impugned new condition and request the same to be withdrawn. We know the government since pursuing the policy of making things difficult for those out of the tax net. Some major steps have already been taken in that direction previously and also taken in this budget.”