Businessmen oppose additional withholding tax on purchase of new cars

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The business community on Friday strongly opposed the additional withholding tax on sale of new cars on the pretext of controlling ‘On Money’ practice, stating the decision would further enhance the prices of already expansive vehicles in the country.
PIAF chairman Mian Nauman Kabir said that the government has decided to impose up to Rs200,000 additional withholding tax on the purchase of new cars on the plea of discouraging ‘On Money’ but actually the move has been aimed at achieving FBR’s target of tax collection.

He said that the locally-assembled cars are very expansive mainly due to exorbitant government taxes and high profit margins of the assemblers despite the fact that their quality is very low. The additional withholding tax of up to Rs200,000 will put more burden on the consumers, who are already buying the very costly vehicles as compared to rest of world.

He said that the consumers were upset due to unnecessarily long delivery time for vehicles by the manufacturers. In order to discourage the practice of “on money” the government, instead of taking some solid measures, has imposed additional Withholding Income Tax, which does not seem to be logical.

He said that government can control prices by checking various costs and then ensuring 20 or 30% profit of the company. “Right now car manufacturers have 1-year advances, which is more than their total investment,” he said. “Secondly, the government can definitely intervene to ensure quality, as a car carries a human being and human life is dependent on its quality. The companies in India, Canada or USA have different features and different safety modes and features. Same models in Pakistan have almost zero safety features where as price in Pakistan is much higher. Let’s forget price for sometimes but at least give us a safe vehicle with less oil consumption,” he argued.

He said that nowadays 25% of the price is being charged in the name of on money. Even if you pay 100% you cannot get a car and have to pay ‘ON’ in lakhs, which is almost 25 percent of the total price that is right under the government nose and in knowledge of the concerned authorities, he added.

PIAF leader appealed the government to devise some mechanism to regulate the automotive sector in view of the quality as well as the prices in consultation with all stakeholders including the industry as well as the consumers.

Mian Nauman Kabir said that local manufactures revise their cars prices whenever they desire and that too without getting due approval from any authority, which affect the common people badly.

The Engineering Development Board (EDB) will have to devise some rules and regulations to benefit the consumers along with securing the interest of the auto assemblers in the upcoming auto policy, he said. PIAF also suggests the Senate Standing Committee on Industries and Production to take the notice of exorbitant and ever-soaring prices of cars in Pakistan along with illegal practice of charging ‘on money’ or premium, he added. The Senate Standing Committee on Industries and Production, the Engineering Development Board, FBR, Pakistan Automotive Manufacturers Association and major Consumers Welfare Associations should sit together and finalize some mechanism to bring down the prices of automobiles in line with the rates of international market, by revising profit margins and decreasing taxes and duties in the larger interest of the public.