News Analysis |
In a commendable move, two of the big three in the Pakistani auto industry have barred non-filer customers including individuals and corporate entities from booking their vehicles.The decision conforms to the recently passed Finance Act 2018 which prevents non-filers of income tax returns from booking and registering new vehicles from July 1, 2018.
“Any application for booking, registration of purchases of a new locally manufactured motor vehicle or first registration of an imported vehicle shall not be accepted or processed by any vehicle registering authority of excise and taxation department or a manufacturer of a motor vehicle respectively, unless the person is a filer,” the Finance Bill FY19 said.
The local auto assemblers fear a sharp drop in sales following the government’s budgetary measure of barring non-filers from purchasing new vehicles.
The auto sector had already shown its reservations over the government’s decision. Stakeholders said that this will encourage investors to buy cars and sell them on premium to non-filers. A local publication quoted an industry official; “It will jeopardise all our efforts to counter the menace of premium, as the decision will motivate investors to buy cars and sell to non-filers on a hefty premium”.
The official advised that the government should charge extra tax from non-filers which will increase the revenue. However, the government is already charging additional taxes from non-filers which haven’t proved to be very effective in increasing the tax net.
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Pak Suzuki Motor Company Ltd (PSMCL), in a letter written to all authorized dealers, ordered to stop booking of vehicles from non-filer customers’ with immediate effect from May 22, 2018.
Similarly, Toyota-Indus Motors has also issued a public notice, urging the customers to change their status as tax filers to avoid any complications in the future.
“To avoid any possible delivery delays or cancellations of vehicle orders, we would like to humbly request all of our valued customers to ensure that they change their status as tax-filers. This will enable us to continue delivering our highest level of service to you now and in the future,” Toyota IMC notice stated.
The decision conforms to the recently passed Finance Act 2018 which prevents non-filers of income tax returns from booking and registering new vehicles from July 1, 2018.
A dealer of Honda Atlas Cars from Islamabad spoke to GVS:“The move by Toyota and Suzuki was expected; Honda plans to follow suit and will announce to stop booking of vehicles from non-filers of income tax returns shortly”.
Assemblers have also asked their dealers to inform the banks not to accept orders from non-filers. For vehicle deliveries scheduled for July and onwards, dealers are asked to approach each customer to change their status to a filer.
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According to the industry executives, 60 percent buyers of cars and light commercial vehicles (LCVs) are non-filers, while 40pc are filers. The local auto assemblers fear a sharp drop in sales following the government’s budgetary measure of barring non-filers from purchasing new vehicles.
Pakistan currently has one of the lowest tax filing numbers in the world. According to statistics, only 1.26 million out of the 200+ million population file their returns. The number makes up only 0.6% of the total population which shows how ineffective authorities have been in collecting taxes.