LAHORE: A think tank has advised the government to ban import of used cars under gifts and baggage schemes.
Pakistan Institute of Trade and Development (PIDAT), affiliated with the ministry of commerce, however, favours the import of used cars under the transfer of residence scheme.
PIDAT, in its report, said the import policy in Pakistan, which is meant for expatriates, is being grossly misused. “Despite the ban on commercial import of used vehicles, it is taking place,” it added. “Unlike regional countries, Pakistan has a weak system to ensure that the transfer of residence and gift and baggage schemes are not misused.” The report attributed the misuse to the absence of technical barriers and standards.
PIDAT advised the government to restrict import to one vehicle per passport for a period of at least two years under the transfer of residence scheme.
This restriction should strictly be administered to stop the misuse of this facility, it said. A compulsory clause may be included that the used vehicle must be registered in the name of expatriate Pakistani importer (or his immediate family) and should be non-transferable for a period of at least one year from the year in which it is imported. This policy is being practiced in Thailand.
According to the analysis, the business of used cars in Pakistan is undocumented. No income tax is collected from the sale of used vehicles.
The study found 10 bulk importers of used vehicles in Pakistan. They hold public auctions where car dealers and individual buyers purchase the cars against payments through cash or grey bank accounts. Assuming an average sales value of Rs1.5 million per unit and import of 36,000 vehicles/year, the undocumented trade of used cars amounts to creation of a black economy equal to a staggering Rs54 billion/year.
The PIDAT report recommended that maximum age of used cars, vans, mini vans, sports utility vehicles, 4x4 and light commercial vehicles should
be restricted to three years. A uniform system of customs valuation should be adopted for used vehicle whether it is below and above 1800cc engine capacity.
The research institute urged the policymakers to replace the fixed duties with customs valuation on the basis of import trade price and manufacturer suggested retail price, which will add Rs7.6 billion to national exchequer.
Like other regional countries, Pakistani government should make pre-shipment inspection of used vehicles mandatory through a recognised Pre-shipment Agency, such as Bureau Veritas or Japan Auto Appraisal Institute.
To protect consumers, only those vehicles shall be importable into Pakistan, which are certified by a Pre-shipment Agency that would certify that the auction house grade of the vehicle in Japan is 4.5 or above, it is not stolen, its body and interior are not rusted and it has no accident marks on its chassis and is road worthy.
Auto sector is among the top five government’s revenue grosser in Pakistan. It employs more than three million people. However, its production growth remained negative between 2006/07 and 2013/14. During this period, the import of used cars was liberalised.