Why imported cars were banned in Pakistan

Some 70,000 cars are imported into Pakistan every year, a report by All Pakistan Motor Dealers Association (APMDA) suggests. This number was much lower in 2016 while in the previous decade, not more than a few thousands of vehicles could enter into the country.

What is the reason behind this number getting increased every year and why Pakistanis are such big fans of imported Japanese cars?

Of course, it is the superior quality, comfort, and safety feature Japanese cars offer as compared to locally manufactured vehicles.  But unfortunately, the burgeoning number might come down drastically in the coming years since the government has announced a new Import Policy, which has created chaos among the car lovers, buyers, and dealers.

The SRO No.52 (I)/2019 issued by the commerce division has been translated by many blogs, channels, and newspapers as a ban on the import of foreign cars into Pakistan. Yes, technically the import would fall drastically but there is something more about this SRO that needs attention.

Let me try to make it simpler to understand what this new import policy about imported Japanese cars is all about?

New Amendment in Auto Import Policy

According to the new policy, it is mandatory to pay the customs duty and other taxes through the foreign exchange which should be endorsed by Bank encasement certificate. That means;

·         You will be liable to give a money trail.

·         You won’t be able to pay the duties and taxes from money earned in Pakistan, and you have to arrange all taxes through foreign exchange earned outside the country.

It is worth noting here that a similar SRO was issued in 2017 which was challenged in the Sindh High Court in favor of the dealers of Japanese imported cars. Eventually, the govt had to reverse it.

Why was this policy designed?

This car import policy was never designed for commercial purposes, and the government never encouraged business people to open dealerships and start selling imported Japanese cars in Pakistan.

The policy was actually meant to facilitate overseas Pakistanis under Personal Baggage, Transfer of Residence and Gift Schemes.

Personal Baggage

Any Pakistani national living abroad for a minimum of 180 days is eligible to use this scheme to avail imported Japanese cars or any other car from a foreign market.

Transfer of Residence

This scheme is just for government employees who are stationed on govt duty outside Pakistan and have completed a minimum of 700 days abroad.

Gift scheme

Any overseas Pakistani can gift a car to his/her family which includes parents, sister, brother, husband, wife, and children above 18, whether married or not.

He/She must be having a minimum of 700 days outside Pakistan.

Contrary to the popular myth, gifted cars are not exempted from excise duty and customs.

Remember that you can avail any of the above schemes on a single passport, once in two years only.

Dealers misusing the schemes

The impact on the business of imported Japanese cars will be damaging. Now, dealers will have to go an extra mile by arranging the expense and duty of the vehicles from outside Pakistan. This will put them under the radar of FBR since they need to provide money trails.

Earlier, dealers used to import multiple cars on the same passport, and some were even found using fake passport copies due to lack of a proper check on them. FBR and Customs collected the duties related to imported cars by just reviewing the logbook of the vehicle. However, after this new amendment importer will provide the passport copy of the sender and the document of money sent by him which will make sure the import of only one car on a single passport in two years.

“There is no mechanism to import used cars in Pakistan other than utilizing these schemes. I know the scheme was not meant for dealers, however, we are in this business and generating revenue for the government,” commented an auto dealer at Maulana Shaukat Ali Road, Lahore.

“The government should allow import of used cars in Pakistan by formulating new laws; otherwise, people will be left with poor quality and no value for money local cars,” He added.

What Government is cooking?

Frankly, the above schemes were never designed to facilitate the business of imported used/reconditioned cars in Pakistan, although, it was practiced right under the nose of policymakers and the government earned huge tax money.

The new policy document does not mention any ban on the scheme; however, it appears to document the entire import activity through proper banking channel for keeping an eye on the money trail.

Although the payment procedure of duties and taxes is cumbersome, it seems to make sure that no substantial amount of dollars go outside the country which national kitty needs the most at the moment. However, the cost of might be higher, it will lose billions of taxes and duties it used to collect.

Final Thought

The new amendment is welcoming. Its the extension of the government’s policy to expand FBR’s tax radar which also includes the earlier ban on non-filers to buy cars in Pakistan.

It will not only boost the local auto industry but will also entice more new manufacturers to install their assembly lines here. Which, in turn, will result in a variety of cars at competitive prices.

Moreover, Pakistan will be having a transfer of technology, employment opportunities for citizens and even will be able to export cars. There is no fun driving used/reconditioned cars while the world moves to better technology and improved cars. We don’t want Pakistan to be a dumpsite of old, reconditioned cars.

Having said that, there are some steps that the government need to take immediately. They have to regulate the prices of the vehicles and pursue local manufacturers to sell cars in a justified price range. The government should devise a proper mechanism to regulate the quality and safety standards of locally assembled vehicles.

Furthermore, the government should take the auto industry seriously and invite a maximum number of auto manufacturers in Pakistan by offering them incentives