MG Cars accused of paying lower taxes than due to Government

Yesterday, Business Recorder broke a story of “mega under-invoicing scam” being investigated by Federal Bureau of Revenue (FBR) of a new company importing cars into the country.

Yesterday, Business Recorder broke a story of “mega under-invoicing scam” being investigated by Federal Bureau of Revenue (FBR) of a new company importing cars into the country. JW SEZ Group recently partnered with a leading Chinese car manufacturer MG to bring MG cars to Pakistan. This joint venture resulted in creation of MG JW Automobile, which is to set up assembly in Pakistan, but till then will import some Completely Built Units (CBUs) to Pakistan.

Citing its sources in FBR, Business Recorder claimed that the company has imported 400 units of the much-demanded MG HS till date, with declared customs value of $11,632 which according to the FBR is “absurdly low” since the same vehicle is being sold in other competitive markets at US $27,000. They have calculated that the company has evaded taxes of over Rs. 1.1 billion in value.

However, later in the day Mr. Javed Afridi, owner of JW Auto Park, the company which owns MG JW Automobile, refuted these claims as “baseless rumors”. He said that for a long time now, Pakistani automobile industry has been hostage to the oligopoly of a few companies that have provided people with low-quality yet high-priced cars. He further said that the new entrants like MG, superior build yet low prices should be treated with competition rather than to tarnish via maligning campaigns.

Read more: Javed Afridi introduces all-new 2000cc double-cabin “MG Extender”

In a series of tweets he wrote “For decades, Pakistani automobile consumers have been exploited by cartels that cornered them with low quality, boring models at exorbitant prices. Plus, buyers had to pay billions of rupees to get delivery of the very vehicles the price of which they had already paid.”

“As new entrants bring in exciting new models at far lower prices, instead of competition, we expect maligning campaigns and baseless rumors.”

“While we know that competition is an unfamiliar phenomenon in Pakistan’s automobile industry, we invite everyone to join in a fair competition to serve Pakistani consumers with a bigger and better variety of vehicles at lower prices,” he added.

In the 34th meeting of Auto Industry Development Committee (AIDC), Pakistan Automotive Manufacturers Association (PAMA), held on 14th January, 2021, showed concern over the fact that the government is giving special incentives to new entrants. Later, in a letter on 8th February to the Engineering Development Board (EDB), PAMA demanded that additional clarification is needed on the cut-off dates for new entrants in the market under the Auto Development Policy 2016-2021. MG has only recently applied for the green-field license, which means that they must set up assembly before the expiration date of policy in June 2021.

As per the aforementioned policy, the car companies can import duty free machinery to set up a plant and there were other tax subsidies for the new entrants such as a concessional rate of custom duty of 10 percent on imported parts and 25 percent on locally manufactured parts for a period of five years for the manufacturing of cars and light commercial vehicles. Also, they can import 100 CBUs at 50% duty to do ground testing.  Meanwhile, the companies must pay complete duty on 101st vehicle. However, according to reports MG has imported 400 CBUs and is no where near setting up local manufacturing.

Read more: Javed Afridi teases spectacular 1500cc MG 6 sedan for Pakistan

JW-ZES Group is the local partner of MG Motors and Javed Afridi, is also the CEO of Haier Pakistan as well as owning the PSL franchise for Peshawar Zalmi. The company debuted too much hype in the Pakistani auto market with MG HS, a compact SUV, in November 2020, and has received very positive feedback so far. The company is also set to launch soon the MG ZS and MG ZS EV following this positive response.

Latest news