The upcoming budget proposes doubling the advance income tax on automobile imports. Also, the government plans to impose a withholding tax on purchase receipts of cars rather than their engine capacity.
The new budget has also proposed an increment in the regulatory additional customs duty (ACD) on imported vehicles. Citing official documents, a media report states that the benchmark for domestic exports has been set at $30 billion in the new budget, while $58.70 billion has been set for imports.
The documents also indicate that the trade deficit for the following fiscal year will be $28.70 billion. According to the documents, the current account deficit is estimated to be $6 billion.
Objections from the Automakers
Pakistan Automotive Manufacturers Association (PAMA) has warned of the detrimental consequences as a result of tax increments.
In a letter to the Chairman Federal Board of Revenue (FBR), PAMA warned that changing the basis of WHT will negatively impact the sales of locally-made vehicles.
Recently, Pak Suzuki Motor Company (PSMC) sent a letter directly to the interim Prime Minister of Pakistan, Mian Shahbaz Sharif, requesting him not to approve the aforementioned plan.
The company highlighted that the local car industry is going through “the very worst of times” with numerous carmakers “on the brink of closure.” The government is yet to respond to these distress calls.