The Pakistan government has established a panel, which has recently recommended the country lowered its imported car duties to buoy the imports and improve overall tax incomes.
According to Mohammad Zubair, a member of the panel, who talked to Bloomberg, the import tariff on every vehicle – either new or used – should be lowered by five percent and the taxes on autos with engines above 1,800 cc should be dropped by a quarter to boost imports and achieve higher revenue from internal tax collections during ownership of the vehicles. The Pakistani government has been asked to lift tax collections as a percentage of gross domestic product to meet the terms of an agreement imposed by an IMF program. Analysts believe that in turn the decision to lower the import duties for all vehicles will have a major impact on local automakers. “Preference of the customer will change to import in the higher segment,” said Asad Nayani, an analyst at Global Securities Ltd. He said the five percent import duty cut on affordable models will not have a serious impact, because of the lower yield.
Local auto stocks saw a reduction in their share price after the announcement, with global automakers implicated on the Pakistan market being Toyota – through its Indus Motor unit – or Suzuki, via its Pak Suzuki Motor firm. The high import tariffs – which can reach 150 percent, have made annual import of higher priced cars and sport utility vehicles slow below 2,000 units in the last seven years. The new policy also proposes subsidies to local manufacturers, new producers and auto suppliers, added Zubair.