The Pakistani government is taking steps to address a loophole in the import of used vehicles. Prime Minister Shehbaz Sharif has directed the Federal Board of Revenue (FBR) to tighten controls on used car imports brought in under schemes meant for overseas Pakistanis – the baggage scheme.
The issue lies in the misuse of programs like the “personnel baggage scheme,” “transfer of residence,” and “gift scheme.” These programs allow returning residents and those receiving gifts from abroad to import used cars at concessionary rates. However, some individuals are exploiting these schemes for commercial gain.
The Loophole
Here’s how the misuse happens: Cars are imported under these schemes using passports of overseas Pakistanis, often without their knowledge or consent. These cars then get immediately flipped in the commercial market for profit. This not only undermines the spirit of the scheme but also creates an unfair advantage for those exploiting it.
The government is tackling this issue on multiple fronts:
FBR Scrutiny: The FBR will implement stricter checks on used car imports. This could involve verifying passport details, travel history, and ensuring the imported vehicle aligns with the purpose of the scheme (e.g., personal use for a returning resident).
Legal Changes: The government is exploring legal changes to prevent businesses from misusing passports of overseas Pakistanis. This could involve stricter penalties for passport misuse and requiring additional documentation for commercial importers.
Potential Sales Restriction: One proposal under consideration is to restrict the local sale of used vehicles imported under these schemes for a period of, say, three years. This would discourage the “buy-to-flip” mentality and ensure the cars are genuinely used for personal purposes.
A more robust system for used car imports will benefit everyone. It ensures the intended beneficiaries – returning residents and those receiving gifts – have genuine access to the scheme. Also, it prevents businesses from exploiting the system and gaining an unfair edge over legitimate car dealers.
Moreover, by regulating the used car market, the government can control potential price fluctuations and ensure a more stable market environment. The government’s efforts to control used car misuse are a positive step towards a more transparent and fair import system.
*https://www.pakwheels.com/blog/restrictions-on-car-imports-cost-fbr-rs-22-billion-in-revenue/
When the previous government did something like this a few years ago, FBR itself reported a huge loss of over Rs. 22 billion in tax revenue because of stopping these grey imports. That was a clear indication that the import of these cars, no matter the method, DO INDEED contribute a huge amount to the national tax net. People gladly paid, and STILL gladly pay, the tax on these imports to get them.
If we further analyze the loss reported by FBR back then, FBR reported it suffered that loss in just the first 7 months alone of that fiscal year! What made it even worse was that this 7 month only tax loss from the “grey imports” was greater than the combined tax paid by our three Japanese giants in that FULL fiscal year! Let that sink in!
In Pakistan, it is always complained that “log tax nahain ada karty (people don’t pay their taxes)”. So, is blocking/restricting such a sector where people are readily willing to pay such high tax, a good idea?
Not only that, many huge and famous car markets and many, many more in almost all cities of Pakistan depend on this “grey” market for their work and it supports a HUGE job market. Just imagine the job-loss and market destabilization because of passing this “law”. We have already seen all this happen the last time such a harsh step was taken without proper consideration.
I hope FBR remembers to ask ALL of these questions and really thinks hard before implementing this “law”; only doing it BECAUSE IT WILL benefit the nation and its economy in someway. I hope and pray all this is not just to help the local ‘imported-parts-assemblers’ lock and monopolize the “free auto market of Pakistan” simply because they managed to grease the right palms.
So, should this sector be facilitated or blocked?! Is stopping it really beneficial to the nation or only to a few? Lets think of the nation for once.