In a move set to impact the automobile industry, the upcoming budget in Pakistan suggests a significant increase in advance income tax on imported cars. Additionally, the government plans to introduce a withholding tax on purchase receipts rather than basing it on engine capacity.
The new budget also includes a proposal to raise the regulatory additional customs duty (ACD) on imported vehicles. According to reliable sources, the benchmark for domestic exports has been set at $30 billion in the budget, while imports have been allocated $58.70 billion.
These documents also reveal that the projected trade deficit for the next fiscal year is estimated to be $28.70 billion. Furthermore, the current account deficit is expected to reach $6 billion.
Expressing concerns over these tax hikes, the Pakistan Automotive Manufacturers Association (PAMA) has warned about the potential negative consequences. In a letter addressed to the Chairman of the Federal Board of Revenue (FBR), PAMA cautioned that altering the basis of withholding tax would adversely affect sales of locally-manufactured vehicles.
Adding to the opposition, Pak Suzuki Motor Company (PSMC) recently sent a direct letter to the interim Prime Minister of Pakistan, Mian Shahbaz Sharif, appealing to him not to approve the proposed plan. Highlighting the dire state of the local car industry, the company emphasized that several carmakers are on the verge of closure. Despite these concerns, the government is yet to respond to these pleas.
Pak Suzuki Motor Company Appeals to Prime Minister to Avoid Tax Hikes on Small Cars
By implementing these measures, the government aims to boost domestic manufacturing and reduce reliance on imported vehicles. However, industry experts and manufacturers are voicing their apprehensions, urging policymakers to reconsider the potential impact on the already struggling automotive sector.
