While the government is trying to broaden the tax net, an illicit practice is being carried out to cheat it out of billions of rupees in duty. The same involves the misuse of the facility of duty-free import of luxury cars by foreign diplomats, officials of international non-governmental organizations and armed forces personnel of multiple countries, claim certain to sources.
In this regard, the Federal Board of Revenue (FBR) has written a letter to the Ministry of Foreign Affairs (MOFA) requesting the ministry to write a letter to all foreign embassies and international NGOs as to determine their regulations for the import of luxury cars – as they are tax-exempt on these cars.
FBR chairman, Shabbar Zaidi, in the letter has briefed MoFA that the exemption is being “misused” by some embassies by importing more cars than they require and the ministry has been asked to review these rules. According to reports, the cars worth billions in duty are imported by foreigners however the real owners are Pakistanis.
In the letter, Zaidi has said,
It has come to the notice of FBR that the vehicles are handed over to unauthorized persons for use and, later after a lapse of some time, these are sold to them.
Under current regulations, foreign diplomats, representatives of international NGOs and foreign members of armed forces don’t have to pay any import duty on cars with diplomatic registration for 3 years. At the same time, import duty is not imposed on cars that are 3 years old or more and after this period, the cars are transferred in the name of its actual owner (a Pakistani).
According to senior officers at the vehicle registration authority of Islamabad, this practice has been going on since 11th September 2001 when the government allowed diplomats to use covered registration number plates due to security concerns. “Now cars are imported by foreign diplomats and they are misused by Pakistani owners who drive them with covered number plates,” an official said.
In some cases, the foreign dignitaries issue “fake appointment letters” that stated that the Pakistanis owning the vehicles are drivers of the embassy in question.